Showing posts with label home prices. Show all posts
Showing posts with label home prices. Show all posts
Monday, October 25, 2021
Should You Buy a Home in the US?
Even at currently elevated US home-price levels, buying still makes sense for those who are set on ownership. But buyers need to be sure that they can accept what could be a rather bumpy and disappointing long-term path for home values.
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Tuesday, February 11, 2014
Speculative Asset Prices (Nobel Prize Lecture)
I will start this lecture with some general thoughts on the determinants of long-term asset prices
such as stock prices or home prices: what, ultimately, drives these prices to change as they do
from time to time and how can we interpret these changes? I will consider the discourse in the
profession about the role of rationality in the formation of these prices and the growing trend
towards behavioral finance and,
more broadly, behavioral economics, the growing acceptance of
the importance of alternative psychological, sociological, and epidemiological factors as
affecting prices. I will focus on the statistical met
hods that allow us to learn about the sources of
price volatility in the stock market and the housing market, and evidence that has led to the
behavioral finance revolution in
financial thought in recent decades.
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Sunday, April 14, 2013
Why Home Prices Change (or Don’t)
WHAT prices will today’s home buyers get if they sell a decade from now?
Most people live in their home for many years. They don’t need to view it as an investment at all, but if they do, they surely need a long forecasting horizon.
The problem is that modern economics has a poor understanding of past movements in home prices. And that makes the task of predicting the state of the market in 2023 challenging, at the very least. Still, we can learn something by analyzing the factors that affect home prices in general.
There has been some good news lately: home prices have risen over the last year, and with those gains there has been a renewed sense of optimism. But do these price increases mean that homes are now good investments for the long haul?
Read more
Most people live in their home for many years. They don’t need to view it as an investment at all, but if they do, they surely need a long forecasting horizon.
The problem is that modern economics has a poor understanding of past movements in home prices. And that makes the task of predicting the state of the market in 2023 challenging, at the very least. Still, we can learn something by analyzing the factors that affect home prices in general.
There has been some good news lately: home prices have risen over the last year, and with those gains there has been a renewed sense of optimism. But do these price increases mean that homes are now good investments for the long haul?
Read more
Friday, September 21, 2012
What Have They Been Thinking? Home Buyer Behavior in Hot and Cold Markets
By Karl E. Case, Robert J. Shiller and Anne Thompson
Between the end of World War II and the year 2000, the U.S. housing market contributed much to the strength of the macro economy. It was a major source of jobs, produced consistently rising home equity, and served as perhaps the most significant channel to the real economy for monetary policy.
But starting with a drop in the S&P/Case–Shiller index for Boston in September of 2005 house prices began to fall in city after city. By the time it was over, home prices were down as much as 32% on a national basis, with many cities down by more than 50 percent, wiping nearly $7 trillion in equity off of the household balance sheet.
Read more
Between the end of World War II and the year 2000, the U.S. housing market contributed much to the strength of the macro economy. It was a major source of jobs, produced consistently rising home equity, and served as perhaps the most significant channel to the real economy for monetary policy.
But starting with a drop in the S&P/Case–Shiller index for Boston in September of 2005 house prices began to fall in city after city. By the time it was over, home prices were down as much as 32% on a national basis, with many cities down by more than 50 percent, wiping nearly $7 trillion in equity off of the household balance sheet.
Read more
Friday, April 20, 2012
The Property Predicament
What would happen if, as so many people are hoping, home prices were to go up dramatically again as they did in the early 2000s? Would such a change really benefit society?
People who most ardently desire this are homeowners who are underwater on their mortgages, who took out mortgages at the peak of the boom and now find that their homes are worth less than they owe on them. They would just feel relieved to get out of the red as soon as possible.
Read more
People who most ardently desire this are homeowners who are underwater on their mortgages, who took out mortgages at the peak of the boom and now find that their homes are worth less than they owe on them. They would just feel relieved to get out of the red as soon as possible.
Read more
Saturday, April 24, 2010
The Housing Recovery Could Be on Shaky Ground
From Fool.com:
To understand the state of the housing market now I spoke with the co-creator of the S&P/Case-Shiller Home Price Index, Robert Shiller...
Jennifer Schonberger: The latest Fed minutes showed the central bank is concerned the activity in the housing sector could be leveling off. What is your take on the state of the housing market now? Do you share the same concern as the Fed?
Robert Shiller: Yes. Home prices have been going up for nearly a year now, according to our data, the S&P/Case-Shiller indices ... Normally we could extrapolate that kind of upward trend because historically home prices have shown a lot of momentum. But I think we're in a very unusual circumstance because of the massive bailouts, the homebuyer tax credits, the Fed's purchase of mortgage-backed securities -- and these things are coming to an end. So it's an unusual period. So I don't trust the trend that we have. I'm worried that it might get reversed.
Schonberger: Speaking of momentum, I remember in our last discussion that momentum and confidence levels are keys in your view to examining the health of the housing market. Is momentum waning now?
Shiller: In terms of the S&P/Case-Shiller numbers, the rate of growth of home prices has fallen. If you look at them in nonseasonally adjusted terms -- just the raw data -- they're falling. But if you seasonally adjust them they're going up. But they're not going up so briskly as they were in the middle of 2009. That's one leading indicator. There are others as well. One that I particularly like is the National Association of Home Builders Housing Market Index, which is based on a survey of their members. That has turned down starting last fall. So we've had months of decline in homebuilders' impressions as to the strength of the market.
Monday, April 12, 2010
Don’t Bet the Farm on the Housing Recovery
By Robert J. Shiller in The NY Times
MUCH hope has been pinned on the recovery in home prices that began about a year ago. A long-lasting housing recovery might provide a balm to households, mortgage lenders and the entire United States economy. But will the recovery be sustained?
Alas, the evidence is equivocal at best.
The most obvious reason for hope is that, unlike stock prices, home prices tend to show a great deal of momentum. Correcting for seasonal effects, home prices as measured by the S.&P./Case-Shiller 10-City Home Price Index increased each month from June 1995 to April 2006, then decreased almost every month to May 2009. Since then, they have risen through January, the latest month for which data is available.
So, because home prices have been climbing of late, isn’t it plausible that they’ll keep doing so?
If only it were that simple.
Read full commentary
MUCH hope has been pinned on the recovery in home prices that began about a year ago. A long-lasting housing recovery might provide a balm to households, mortgage lenders and the entire United States economy. But will the recovery be sustained?
Alas, the evidence is equivocal at best.
The most obvious reason for hope is that, unlike stock prices, home prices tend to show a great deal of momentum. Correcting for seasonal effects, home prices as measured by the S.&P./Case-Shiller 10-City Home Price Index increased each month from June 1995 to April 2006, then decreased almost every month to May 2009. Since then, they have risen through January, the latest month for which data is available.
So, because home prices have been climbing of late, isn’t it plausible that they’ll keep doing so?
If only it were that simple.
Read full commentary
Saturday, March 6, 2010
Economic View: Mom, Apple Pie and Mortgages
By Robert J. Shiller in the NY Times:
FOR decades, the federal government has subsidized housing — particularly owner-occupied housing. This has been especially true during the continuing financial crisis, with Fannie Mae, Freddie Mac and the Federal Housing Administration propping up the housing market by issuing guarantees for investors on most new mortgages.
But what is the long-term justification for putting taxpayers on the line to subsidize homeownership? Is this nothing more than a sacred cow in American society — a political necessity because so many voters own homes and are mindful of their resale value?
In fact, there is much more to the history of subsidizing housing. While the crisis in the housing market shows that our current approach is far from perfect, there is a certain wisdom behind it, related not only to economic stimulus but also to the preservation of a sense of national identity. It’s important to remember this as we consider re-engineering our institutions as the crisis ebbs.
Read full commentary
FOR decades, the federal government has subsidized housing — particularly owner-occupied housing. This has been especially true during the continuing financial crisis, with Fannie Mae, Freddie Mac and the Federal Housing Administration propping up the housing market by issuing guarantees for investors on most new mortgages.
But what is the long-term justification for putting taxpayers on the line to subsidize homeownership? Is this nothing more than a sacred cow in American society — a political necessity because so many voters own homes and are mindful of their resale value?
In fact, there is much more to the history of subsidizing housing. While the crisis in the housing market shows that our current approach is far from perfect, there is a certain wisdom behind it, related not only to economic stimulus but also to the preservation of a sense of national identity. It’s important to remember this as we consider re-engineering our institutions as the crisis ebbs.
Read full commentary
Sunday, October 11, 2009
A Bounce? Indeed. A Boom? Not Yet.
by Robert J. Shiller in the NY Times:
THE sudden rise in home prices suggests that the psychology of the market has shifted substantially. But what should we expect in the months ahead? Not necessarily that we’re entering a new housing boom. To a large extent, where we’re heading depends on what home buyers are thinking.
Some clues are found in the annual home-buyer surveys that Karl Case, the Wellesley economics professor, and I have run for years. For the surveys, we canvas recent home buyers in four cities — Los Angeles, San Francisco, Milwaukee and Boston; the surveys are now being conducted under the auspices of the Yale School of Management. We have just received the 2009 results, with responses from June and July.
This year’s survey coincides nicely with the upturn in home prices, the sharpest change in direction we have ever seen. The data show that the Standard & Poor’s/Case-Shiller 10-City Composite Home Price Index for the United States rose 3.6 percent between April and July. While that is not a whopping increase, it followed a decline of 4.8 percent in the previous period, between January and April.
The suddenness of this shift surprised me. In my column in June, I wrote that home prices might well continue to decline for years. As of that time, the S.& P./Case-Shiller price index had fallen every month for almost three years. Add to that the prospect of continuing high unemployment and a weak economy for years to come, and the prospects for home prices did not seem rosy.
Read the full article
THE sudden rise in home prices suggests that the psychology of the market has shifted substantially. But what should we expect in the months ahead? Not necessarily that we’re entering a new housing boom. To a large extent, where we’re heading depends on what home buyers are thinking.
Some clues are found in the annual home-buyer surveys that Karl Case, the Wellesley economics professor, and I have run for years. For the surveys, we canvas recent home buyers in four cities — Los Angeles, San Francisco, Milwaukee and Boston; the surveys are now being conducted under the auspices of the Yale School of Management. We have just received the 2009 results, with responses from June and July.
This year’s survey coincides nicely with the upturn in home prices, the sharpest change in direction we have ever seen. The data show that the Standard & Poor’s/Case-Shiller 10-City Composite Home Price Index for the United States rose 3.6 percent between April and July. While that is not a whopping increase, it followed a decline of 4.8 percent in the previous period, between January and April.
The suddenness of this shift surprised me. In my column in June, I wrote that home prices might well continue to decline for years. As of that time, the S.& P./Case-Shiller price index had fallen every month for almost three years. Add to that the prospect of continuing high unemployment and a weak economy for years to come, and the prospects for home prices did not seem rosy.
Read the full article
Wednesday, September 30, 2009
Q&A: Shiller Sees 5 Years of Stagnant Home Prices
From the Wall Street Journal:
Robert Shiller, the Yale University economist who famously predicted the housing bust, was awarded the Deutsche Bank Prize in Financial Economics today. In this interview, he talks about the state of the housing market and the implications of low interest rates.
Is the slump in U.S. home prices bottoming out?
Shiller: The situation has definitely changed. With our numbers — the S&P/Case Shiller home price index — going up sharply. It looks like a major turnaround. We’ve been watching that for three months now, and we have some concern that it could be an aberration and temporary. But, at this point, it seems to be evident in just about every city in the U.S. That suggests it’s real. But it probably isn’t the beginning of a major boom, just because the economy is in such bad shape. There’s also a chance that it will reverse. It’s still only three months old, so it’s very hard to be sure at this point. The most likely scenario is that it won’t continue at this high rate of increase, but that it will neither go down a lot, nor up a lot.
So the index will move sideways for a while?
Shiller: Yes, for a while, meaning five years.
What are the main factors driving U.S. house prices? What could push them up, or cause another slump?
Shiller: The main factor is the world economic crisis and the efforts of governments around the world to stimulate the economy. Parts of those efforts have been directed at the housing market. In the U.S., there is an 8,000 dollar first-time home buyer’s tax credit which expires at the end of November. That’s a reason for concern, as it comes to an end. Also, the Federal Reserve has a plan to buy $1.25 trillion worth of mortgage-backed securities to support the housing market. They are most of the way through the program and anticipate phasing it out at some time in 2010 - that’s another thing that will go away. We’ve yet to see how the housing market will continue. Part of the problem is that people are buying now rather than later. When later comes, there could be a downturn in the market.
Read full interview
Robert Shiller, the Yale University economist who famously predicted the housing bust, was awarded the Deutsche Bank Prize in Financial Economics today. In this interview, he talks about the state of the housing market and the implications of low interest rates.
Is the slump in U.S. home prices bottoming out?
Shiller: The situation has definitely changed. With our numbers — the S&P/Case Shiller home price index — going up sharply. It looks like a major turnaround. We’ve been watching that for three months now, and we have some concern that it could be an aberration and temporary. But, at this point, it seems to be evident in just about every city in the U.S. That suggests it’s real. But it probably isn’t the beginning of a major boom, just because the economy is in such bad shape. There’s also a chance that it will reverse. It’s still only three months old, so it’s very hard to be sure at this point. The most likely scenario is that it won’t continue at this high rate of increase, but that it will neither go down a lot, nor up a lot.
So the index will move sideways for a while?
Shiller: Yes, for a while, meaning five years.
What are the main factors driving U.S. house prices? What could push them up, or cause another slump?
Shiller: The main factor is the world economic crisis and the efforts of governments around the world to stimulate the economy. Parts of those efforts have been directed at the housing market. In the U.S., there is an 8,000 dollar first-time home buyer’s tax credit which expires at the end of November. That’s a reason for concern, as it comes to an end. Also, the Federal Reserve has a plan to buy $1.25 trillion worth of mortgage-backed securities to support the housing market. They are most of the way through the program and anticipate phasing it out at some time in 2010 - that’s another thing that will go away. We’ve yet to see how the housing market will continue. Part of the problem is that people are buying now rather than later. When later comes, there could be a downturn in the market.
Read full interview
Friday, September 25, 2009
Thursday, August 27, 2009
Friday, July 3, 2009
Saturday, June 20, 2009
Unlearned lessons from the housing bubble
From the Gulf Times:
By Robert J Shiller/New Haven, USFull article
There is a lot of misunderstanding about home prices. Many people all over the world seem to have thought that since we are running out of land in a rapidly growing world economy, the prices of houses and apartments should increase at huge rates.
That misunderstanding encouraged people to buy homes for their investment value – and thus was a major cause of the real estate bubbles around the world whose collapse fuelled the current economic crisis. This misunderstanding may also contribute to an increase in home prices again, after the crisis ends. Indeed, some people are already starting to salivate at the speculative possibilities of buying homes in currently depressed markets.
Saturday, June 6, 2009
Why Home Prices May Keep Falling
From the NY Times:
Home prices in the United States have been falling for nearly three years, and the decline may well continue for some time.
Even the federal government has projected price decreases through 2010. As a baseline, the stress tests recently performed on big banks included a total fall in housing prices of 41 percent from 2006 through 2010. Their “more adverse” forecast projected a drop of 48 percent — suggesting that important housing ratios, like price to rent, and price to construction cost — would fall to their lowest levels in 20 years.
Such long, steady housing price declines seem to defy both common sense and the traditional laws of economics, which assume that people act rationally and that markets are efficient. Why would a sensible person watch the value of his home fall for years, only to sell for a big loss? Why not sell early in the cycle? If people acted as the efficient-market theory says they should, prices would come down right away, not gradually over years, and these cycles would be much shorter.
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