Tags: Shiller | US | japan | Housing

Yale’s Shiller: US Could Have Japanese-Style Housing Slump

Thursday, 29 Mar 2012 06:58 AM

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Yale economist Robert Shiller says the United States could experience a Japanese-style housing slump that lasts for “years and years.”

“I’m worried that home prices have been declining now for about five years,” Shiller told Yahoo Finance. “There’s a lot of downward momentum,” with year-on-year and even month-on-month declines.

“On a seasonally-adjusted basis, it’s just flat.”

Editor's Note: Wall Street Insider Exposes Death of Main Street America

The big question now, says Shiller, is if the market is poised to recover. “I give it a chance that it is,” he says, citing optimistic reports on consumer confidence and positive news on the employment front.

Shiller noted that many young people who might have been first time homebuyers are living with their parents instead of purchasing their own homes, and many others are opting to live in apartments and other rental housing.

Shiller says the shift toward renting and city living could mean “that we will never in our lifetime see a rebound in these prices in the suburbs.”

“If you’re young and you don’t need to buy, just think what kind of nice, new modern high rise apartment building, with all the exciting things built in you might get in the city. Maybe some people are thinking that way.”

“The big thing is that we haven’t resolved Fannie (Mae) and Freddie (Mac), says Shiller. “This inadequate demand you see is only there because of the government.”

Shiller says people sense that the market is becoming more and more political and are holding back. Technology plays a role as well: As we get better and better at making houses, prices go down. “People won’t want the old ones, so prices will decline,” Shiller says.

Investors, Shilling says, will do better to buying shares in a complex of some sort because “dispersed single family homes are a hard business model.”

Reuters reports there’s a growing list of big and small investors who see fat profits to be made in renting out foreclosed homes, especially now the U.S. government is moving ahead with a trial project to sell big pools of single-family homes that Fannie Mae currently owns in some of the hardest-hit housing markets.

A perpetually sluggish housing market, which Shiller believes has become “more and more political,” might push the country in a “Japan-like slump that will go on for years and years.”

Editor's Note: Wall Street Insider Exposes Death of Main Street America




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