Shiller: Home Prices Headed Higher? Think Again

Sunday, 27 Jan 2013 05:04 PM

By Dan Weil

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A recent rebound in housing statistics has some people excited that another boom is coming in the residential real estate market.

Not so fast, says Yale economist Robert Shiller.

“The unfortunate truth is that the tea leaves don’t clearly suggest any particular path for prices, either up or down,” he writes in The New York Times.

Video: Economist Predicts 'Unthinkable' for 2013 

Shiller is well aware that the S&P/Case-Shiller 20-City Index of home prices, partly named after him, rose 9 percent during the six months from March to September.

But some of that gain was seasonal, Shiller says. And, “any short-run increase in inflation-adjusted home prices has been virtually worthless as an indicator of where home prices will be going over the next five or more years.”

Other housing indicators, such as home starts and sales volume, are rising too, Shiller acknowledges. But there’s no real explanation for that, he says. The economy’s improvement is only mild.

Meanwhile, other data argue against further gains for housing, Shiller says.

For example, the homeownership rate dropped to 65.5 percent in the third quarter last year from 69 percent in the six years earlier. And the economy still faces uncertainty.

Many disagree with Shiller. Brian Bethune, president of Alpha Macroeconomic Foresights, predicts new home sales will rise 10 to 15 percent this year amid enthusiasm about the economy.

“The underlying fundamentals of the U.S. economy are pretty good,” he tells The Wall Street Journal.

Video: Economist Predicts 'Unthinkable' for 2013

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