Even though home prices have been climbing in recent months, investors shouldn't go long on a housing recovery, says economist Robert Shiller, co-founder of the Case-Shiller index.
Evidence that the apparent economic recovery is sustainable is equivocal at best, he says.
"Home price booms and busts do end, sometimes quite suddenly, as was the case for the boom of 1995 to 2006 and the bust of 2006 to 2009," Shiller writes in The New York Times.
"Today, we need to worry about strong headwinds, as the government begins to withdraw its support of a still-troubled lending industry and as foreclosures are dumping millions of homes onto the market."
Shiller says factors in housing demand change include interest-rate changes and tax credits, but these events don’t line up neatly with major turning points in the market.
The question now, says Shiller, is whether a strong case exists for a new housing bull market since the home-price turning point in May 2009.
“Though there is no way to be precise, I don’t believe it has,” he says.
The credit of up to $8,000 offered by the Obama administration to first time homebuyers has pushed about 900,000 additional buyers into the market, says Lawrence Yun, chief economist for the National Association of Realtors. The additional stimulation has helped stabilize home prices.
“It is laying the foundation for more normal housing market conditions, and helping assure that we have a sustainable economic recovery as homeowners don't see further destruction of their wealth,” Yun told The Associated Press.
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