Robert Shiller Is Downbeat About Housing

The celebrated economist thinks residential real estate is ‘looking weaker,’ despite some encouraging data.

The reverberations of the 2008 housing bust are still with us. Nobel Prize winning economist Robert Shiller, who tracks US home prices, is not optimistic about the future of residential real estate—even though some data tend to argue that the market is fine.

“It’s looking weaker now,” he said in an appearance on CNBC. In 2004, before housing started to implode, home prices advanced at 12%, and with higher mortgage rates (6% for a 30-year fixed loan) than today, when you pay an average 4.3%, according to Bankrate.

His dour outlook comes at a time when unemployment is quite low, 3.8%, which with lower loan costs should spur more people to buy homes. But recent housing data are mixed. Home starts fell 8.7% in February from the month before, although existing home sales were up 11.8%. Existing dwelling sales are still about 1 million short of the 6 million units seen prior to the financial crisis.

By Shiller’s data, US home price increases have continued to slow. They had a 4.3% annual gain in January, down from 4.6% the month before, by the count of the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. 

On the other hand, homebuilder stocks are rallying, with the SPDR Homebuilders exchange-traded fund up 17% this quarter.  

“This doesn’t feel like a boom,” Shiller remarked. “It’s not exciting.” He did allow, though, that at least people “aren’t worried about losing their jobs, which makes them not want to buy homes.”


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