Robert Shiller Comments on the Spanish Housing Market

By on April 30, 2012

Robert Shiller - Case Shiller IndexRobert Shiller, Yale University professor of economics and co-founder of the Case-Shiller index, was on CNBC’s Squawk Box Europe this morning.  Shiller discussed housing prices in Spain, which have been instrumental in its economic downfall.  Shiller also commented on home prices in the U.  S.  and the psychological and economic factors effecting prices.

Shiller said Spain has had a huge bubble, but he didn’t know if we can measure prices there accurately.  Shiller added it would be too difficult to make a 5-year forecast as posed by the interviewer.

Shiller said home prices are very different from stock prices.  Home prices show a lot of momentum and when they go down they can go down for five years, or even ten years.  Based on this, Shiller considered it a dismal time for the Spanish housing market.

When asked if he believed housing has bottomed in the U. S.,  Shiller replied he isn’t the one saying this.  He said it is common for people to claim home prices have turned around, but he doesn’t know where they are getting that idea, except that prices are down to normal levels.

The danger to home prices in the U. S. is that they may overshoot down, according to Shiller. He added that his Case-Shiller index has been down five months in a row and show a continuing downtrend. Shiller warned that it is hard to forecast right now.

Shiller said there was no certainty U. S. home prices would continue down, and added there were positive signs such as inventory being very low.

Shiller cautioned that the U. S. housing market is very different in that it was the biggest bubble in U. S. history. Therefore he finds it hard to forecast and won’t put himself on record saying which direction it will go.

The interview continued with Shiller commenting on whether Europe could lead the U. S. into recession (it could), parallels to the 17-year Japanese housing depression, the importance of behavioral economics (‘people aren’t as smart as they seem’), the recent phenomenon of housing being viewed as an investment, the impact of central bank manipulations, and the effects of the new austerity.

One Comment

  1. The Edge

    April 30, 2012 at 1:15 pm

    The Spanish bubble has only begun deflating. There will be years and years of economic pain ahead for those profligate spenders. There is no easy road to riches.

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