Robert Shiller: US houses are going down
Robert Shiller created the Case-Shiller index to track house-price trends. So, what does the Yale professor see in store for US property prices?
Yale professor Robert Shiller says the US housing market "still hasn't hit bottom". He has a good record here, having developed the Case-Shiller index to track house-price trends and called the bubble of the 2000s. "I don't see any reason to think that prices are going to start heading up dramatically now."
Record low interest rates won't boost housing, he says, claiming "the model hasn't worked very well historically". The problem is that "we've never had a bubble of this magnitude before". As for house prices, the "big thing is momentum. If it's been going down, it will continue going down."
This is bad news for the recovery, says Shiller. The housing wealth effect, where house prices encourage homeowners to spend, fell massively in the last five years. He calculates that every dollar spent on a new house creates $1.40 in economic activity, "but ownership is going down".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The index scores US house prices at 130.39, below their 2006 high of 189.93, but above the 2000 100 level, meaning they could fall further. Prices are good value if you are looking for a place to live, says Shiller. But as an investment, real estate is "not a clever move".
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
How ‘Bed & ISA’ could save you £15,000 over a decade
Moving your investments into a tax-free wrapper through ‘Bed & ISA’ transactions could save you thousands over the long run by cutting your tax bill
By Katie Williams Published
-
House prices hit record high, says Halifax
UK house prices rose 3.9% over the past year, with a typical property now costing £293,999. We look at which regions are seeing the strongest growth, and whether the rally in house prices will continue next year
By Ruth Emery Published