Tags: Sternlicht | Shiller | housing | asset

Starwood Capital's Sternlicht Clashes With Shiller on Housing Market

By    |   Thursday, 19 February 2015 01:39 PM

Two of the biggest real estate experts around — Nobel laureate economist Robert Shiller and Starwood Capital CEO Barry Sternlicht — don't see eye to eye on the housing market.

Shiller told CNBC Wednesday that the housing market appears to have peaked. "Home prices are . . . at about the right level based on history. So maybe they won't go anywhere in the near future," the Yale professor said.

But Sternlicht sees it differently. "The housing sector is going to be a major asset class in this country," he told CNBC. And it's an asset class that is "actually trailing asset bubbles," Sternlicht argues. "It's cheaper to buy a house and finance it than it is to rent in many markets."

Existing home sales rose 2.4 percent in December from November, according to the National Association of Realtors. And the median home sales price for all of 2014 rose to its highest level since 2007 — $208,500.

Granted, Americans are "a little nervous about taking mortgages," Sternlicht noted. But he thinks falling gasoline prices will boost consumer confidence.

"You're just not seeing the consumer. He's buying a car, but he's not making that house expenditure. And he's financing a car at zero," Sternlicht explained.

Meanwhile, you might think that the bursting of the housing bubble and the decline in homeownership rates have obliterated the housing wealth of our older workers/retirees. But that's not the case, says Alicia Munnell, director of the Center for Retirement Research at Boston College.

"Older households do not have as much home equity as during the bubble in house prices, but it remains an important component of wealth," she wrote in an article for MarketWatch.

In 2013, according to the Federal Reserve, 77 percent of households in their early 60s owned a home, with a median price of $185,000.

"Subtracting outstanding mortgage balances from the gross house price yields median home equity of $110,000, which accounts for more than 40 percent of the homeowners’ total wealth as conventionally measured," Munnell noted.

"The importance of home equity over most of the income distribution shows that it could provide an important source of income in retirement."

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Two of the biggest real estate experts around — Nobel laureate economist Robert Shiller and Starwood Capital CEO Barry Sternlicht — don't see eye to eye on the housing market.
Sternlicht, Shiller, housing, asset
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2015-39-19
Thursday, 19 February 2015 01:39 PM
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