Tags: shiller | housing | rebound

Shiller: I See No Housing Rebound This Year

By    |   Monday, 08 Jun 2009 03:31 PM

Even if there is a quick end to the recession, investors should expect the housing market to continue performing poorly for at least the remainder of this year, says Yale economist Robert Shiller.

“People won’t all change their views about homeownership at once,” Shiller writes in The New York Times.

“Some will focus on recent price declines, which may seem to belie any improvement in the economy, reinforcing negative attitudes about the housing market.”

In fact, Shiller notes that housing is still so bad that even the federal government has projected price decreases through 2010.

Moreover, the Federal Reserve’s $1.2 trillion plan intended to push down mortgage rates is having precisely the opposite effect, creating a Catch-22 that threatens to make matters even worse.

The reason? Economic recovery requires that consumers spend more, but rising rates mean that potential buyers will be shut out of the market because they won’t be able to afford higher monthly payments —and fewer Americans will be able to refinance their home loans.

Rates are rising because bond investors worry about the threat of inflation driving then up.

"The bond market is calling the Federal Reserve out," Weiss Research real estate analyst Mike Larson told the Associated Press.

"Investors are saying that the Fed can't just print money out of thin air to finance a massive deficit."

After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997.

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Even if there is a quick end to the recession, investors should expect the housing market to continue performing poorly for at least the remainder of this year, says Yale economist Robert Shiller. “People won’t all change their views about homeownership at once,” Shiller...
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2009-31-08
Monday, 08 Jun 2009 03:31 PM
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