Monday, April 27, 2009

Robert Shiller at Seattle Pacific University

by Calculated Risk on 4/27/2009 08:49:00 PM

Professor Shiller spoke at Seattle Pacific University today. After the Q&A, reader Erik asked Shiller:

Q: Why does the FHFA (OFHEO) index show house price gains for the last two months, whereas the Case-Shiller is showing prices are still falling.

A (Erik's notes): He thought about it for a bit, and said "I haven't studied it yet", I think it is because the "OFHEO index doesn't capture foreclosures as much our index." They tend to use conventional mortgages more and conventional mortgages seem to hold out longer and as a result "there may be an upward bias to their numbers." He then paused and said, the OFHEO numbers are a bit fishy (he looked perplexed) to me because they seem to have broken the smooth trend (he gestured with his hand the trend and finished with an upward movement) and I can't quite figure out where they came from, but I suspect it is from them capturing too few foreclosures or us capturing too many (laughs) even OFHEO has said they don't know why or can't explain their own numbers from the last two months.
I'll revisit this question soon, but I prefer the Case-Shiller index.

Tim at the Seattle Bubble Blog has more: Robert Shiller at SPU—Psychology and the Housing Market
One amusing part of the afternoon session was a story Dr. Shiller related about a localized Los Angeles housing bubble in 1885. In describing the mentality in 1885 Los Angeles, he said that people thought “Los Angeles is special!” He also quoted from an article in the LA Times which was published during the aftermath of the collapse in 1886:
We Californians have learned something. And that is that home prices can’t just go up forever—they have to be supported by something. Never again will Californians make this mistake.
For anyone interested in hearing the entire afternoon lecture, you can listen to it right here:

Also, the Case-Shiller house price index for February will be released tomorrow morning (Tuesday).