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Monday, July 13, 2009

Shiller on Housing

by Calculated Risk on 7/13/2009 10:19:00 AM

"One thing is true about housing, it is a very inefficient market - and it shows momentum. And in fact, when the rate of decline slows that is evidence that the rate of decline will continue to slow because there has been a second derivative effect that is actually in the data historically."
Robert Shiller, July 13, 2009
UPDATE: Ignore the Tech Ticker story title - Shiller said he felt an echo bubble was unlikely.

An interview with Robert Shiller at Tech Ticker: “Another Bubble” In Housing? It Could Happen, Says Yale’s Robert Shiller (ht Dirk van Dijk)
The slowing rate of decline in home prices is likely to continue but the housing market is "still in an abysmal situation," says Robert Shiller, a professor of economics at Yale. ... [Shiller] says the housing market could "languish for many years," due to the "huge inventory" of unsold holds, "shadow inventory" of homes kept off the market by banks and other potential sellers, and "a lot of financial problems."

[Shiller] believes "there could be another bubble" in housing, once the excess inventory is worked off. "This is not my more probable scenario [but] people have gotten very speculative in their attitudes toward housing," he says.
Housing markets are very inefficient - and that is why it takes several years for prices to fall to a market clearing price. Even if the rate of price declines has slowed, there will probably be a long tail of real price declines in many areas.
"My more probable scenario is languishing of the housing market for years."
Robert Shiller