Yale's Robert Shiller: ‘Housing Haze Is Very Thick’

Tuesday, 30 Apr 2013 08:02 AM

By Dan Weil

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Trying to predict the future of the housing industry is a fool’s errand, says Yale economist Robert Shiller.

That’s because there are so many unpredictable factors surrounding the market, he writes in The New York Times.

“The housing haze is very thick, and so many things affect home prices that it is hard to foresee prices for a particular home years from now,” Shiller says.

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He cites several unknowable factors: construction productivity, inflation and the growth and bursting of speculative bubbles in both home prices and long-term interest rates.

“The outlook is so ambiguous that there is no single answer to the question of housing’s potential as a long-term investment,” Shiller notes.

He offers a couple different ways to approach the market now.

“If you want to settle down for a quiet life and watch your children grow up in a nice neighborhood, you might well act now to lock in an ultra-low mortgage rate,” Shiller suggests.

“Then again, if you’re restless, ambitious and determined to be mobile, it might be sensible to rent rather than own.”

Given all the uncertainties, it may not even be possible to calculate the best economic return, he adds.

“Instead, it may be wisest to choose the housing that best meets your personal needs, among the choices you can afford.”

The housing market has rebounded over the past year, though Shiller is uncertain that will last. Home sales gained 1.5 percent in March.

“There is momentum in the housing market, in that inventories are lean, prices are picking up, and people are trying to buy, which is fueling the recovery,” Daniel Silver, an economist at JPMorgan Chase, tells Bloomberg.

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