Robert Shiller Says U.S. Housing Market May Have Further to Drop
A U.S. housing-market revival may prove illusory and the threat of further weakness remains, said Robert Shiller, a professor at Yale University and co-creator of the S&P/Case-Shiller index of property values.
“The housing market has been declining for something like six years now, it could go on, that’s my worry,” Shiller told Tom Keene in a Bloomberg Television interview today in Davos, Switzerland. “The short-term indicators are up now, it definitely looks better, but we saw that in 2009.”
The property market has shown signs of recovery and homebuilding has rebounded as low borrowing costs spur buyer demand, bolster prices. Values rose 7.4% in November from a year earlier, the ninth straight increase and the biggest gain since May 2006, Irvine, Calif.-based data provider CoreLogic said last week.
“It’s a good housing market in the sense that mortgage rates are very low and prices have come down to normal levels, so yes, it’s a good time to buy if nothing bad happens,” Shiller said. “But it’s also a very bad housing market in that most of the mortgages are being supported by the government, and we have the Fed and this buying program. It’s a very abnormal market. There’s a lot of uncertainty going forward.”
The average rate for a 30-year fixed mortgage fell to 3.38% in the week ended Jan. 17 from 3.4%, McLean, Va.-based Freddie Mac said that day. The average rate dropped to a record 3.31% in November. New-home sales in December picked up to a 385,000 annual rate, according to the median forecast of economists surveyed by Bloomberg ahead of a Commerce Department report tomorrow.
The S&P/Case-Shiller index of property values in 20 cities increased an annual 4.3% in October, the biggest 12-month advance since May 2010, the group said on Dec. 26. The next report is due on Jan. 29.
Data on Jan. 22 showed sales of U.S. existing homes unexpectedly fell in December. Purchases fell 1% to a 4.94 million annual rate last month, the National Association of Realtors said. The median forecast in a Bloomberg survey was for a gain to a 5.1 million rate.
Shiller, who spoke while attending the World Economic Forum’s 2013 annual meeting, also said that while global economic conditions are “a little better,” there are still risks to the recovery.
“We’ve been five years in a slow economy, and it could go quite a bit longer,” he said. “We’ve seen gross domestic product growth at subnormal levels.”
He added, “I think we’re pretty far from irrational exuberance, maybe 50 years away.”