From Mr. Shiller himself: 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... [more]
From Mr. Shiller himself:
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.
http://www.nytimes.com/2009/06/07/business/economy/07view.html?ref=business
Wow! The price-to-rent ratio! What a neat idea!
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Response by crazyelegant
about 17 years ago
Posts: 1
Member since: Jun 2009
Interesting where Schiller basically talks about how there is a lack of equivalence between renting and buying as a housing product:
"And [homeowners] don’t like shifting from being owners to renters, a process entailing lifestyle changes that can take years to effect."
Interestingly also, his point that real estate markets don't act according to the efficient markets theory, "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," which, as any trader and investor would know intuitively (and conversely, any ivory tower economist would not), is an argument against the supposedly prudent thoughts all of the people who called themselves bears or complained about ever increasing prices during the run-up in real estate. All of the persistent and insistent bears during the up-times, if they are saying to people now something to the effect of "just sell now" and rent, should have know and reserved that as an option and an argument to buy during the up-turns.
Surely, I believe prices are declining now and for some [undetermined] time to come, but anyone thinking that the current "sell sell sell" promoters actually have true wisdom, consider if they are just conveniently and statically on the right side of the coin during this period or if they are truly able to moderate their views in response to all of the factors in the market. Don't count on people who didn't _lose_ money to help you make money. ... or make a smart personal housing lifestyle decision.
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Response by w67thstreet
about 17 years ago
Posts: 9003
Member since: Dec 2008
check back in 6 months... then 6 months after that... and so on and so on.... proof in the pudding...
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Response by Lecker
about 17 years ago
Posts: 219
Member since: Feb 2009
I am a believer Steve - in fact, my family is moving this week to a new place we are renting. The rent is remarkably affordable with a ton more ammenities than my current place. We got a deal!
We thought about buying, but I think there are going to be fewer and fewer "greater fools" to keep the NY RE ponzi - scheme - condo - appreciation - machine going in the near future. For what would be the biggest purchase of my life and represent a debt I may never live to repay, I am very apprehensive about buying now....
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Response by lajeep405
about 17 years ago
Posts: 124
Member since: Jul 2007
Lecker, I think they call it "clearing out the suckers". Just an analogy to the financial markets.
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Response by stevejhx
about 17 years ago
Posts: 12656
Member since: Feb 2008
crazy, you make excellent points. Wrong, but excellent. The reason people don't often shift between rentals and purchasing is that once you buy you've effectively locked in your rent (assuming no ARM). Anyone who purchased in 1999 has nothing to worry about in this downturn.
Which is why the arguments is about TODAY's rents and TODAY's purchase prices.
This is funny: "as any trader and investor would know intuitively"
Houses are not traded. Real estate is an illiquid market.
"and conversely, any ivory tower economist would not"
Robert Shiller is a professor of economics at Yale.
"is an argument against the supposedly prudent thoughts all of the people who called themselves bears or complained about ever increasing prices during the run-up in real estate."
What? How so?
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Response by Gopher_1
about 17 years ago
Posts: 87
Member since: Nov 2008
I'm still pretty bearish about the housing market, but I would caution two things:
1 - Shiller is talking about national housing, NYC may fare differently
2 - His company is marketing a product that will allow retail investors to take long or short views on housing, so he is incentivized to talk up the bearish case (easy for retail to take the bullish case currently, hard for them to take a pure bearish stance without his company's product)
I'm not saying he is being untruthful or exagerrating, but it is important to know everyone's ax in this
Interesting where Schiller basically talks about how there is a lack of equivalence between renting and buying as a housing product:
"And [homeowners] don’t like shifting from being owners to renters, a process entailing lifestyle changes that can take years to effect."
Interestingly also, his point that real estate markets don't act according to the efficient markets theory, "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," which, as any trader and investor would know intuitively (and conversely, any ivory tower economist would not), is an argument against the supposedly prudent thoughts all of the people who called themselves bears or complained about ever increasing prices during the run-up in real estate. All of the persistent and insistent bears during the up-times, if they are saying to people now something to the effect of "just sell now" and rent, should have know and reserved that as an option and an argument to buy during the up-turns.
Surely, I believe prices are declining now and for some [undetermined] time to come, but anyone thinking that the current "sell sell sell" promoters actually have true wisdom, consider if they are just conveniently and statically on the right side of the coin during this period or if they are truly able to moderate their views in response to all of the factors in the market. Don't count on people who didn't _lose_ money to help you make money. ... or make a smart personal housing lifestyle decision.
check back in 6 months... then 6 months after that... and so on and so on.... proof in the pudding...
I am a believer Steve - in fact, my family is moving this week to a new place we are renting. The rent is remarkably affordable with a ton more ammenities than my current place. We got a deal!
We thought about buying, but I think there are going to be fewer and fewer "greater fools" to keep the NY RE ponzi - scheme - condo - appreciation - machine going in the near future. For what would be the biggest purchase of my life and represent a debt I may never live to repay, I am very apprehensive about buying now....
Lecker, I think they call it "clearing out the suckers". Just an analogy to the financial markets.
crazy, you make excellent points. Wrong, but excellent. The reason people don't often shift between rentals and purchasing is that once you buy you've effectively locked in your rent (assuming no ARM). Anyone who purchased in 1999 has nothing to worry about in this downturn.
Which is why the arguments is about TODAY's rents and TODAY's purchase prices.
This is funny: "as any trader and investor would know intuitively"
Houses are not traded. Real estate is an illiquid market.
"and conversely, any ivory tower economist would not"
Robert Shiller is a professor of economics at Yale.
"is an argument against the supposedly prudent thoughts all of the people who called themselves bears or complained about ever increasing prices during the run-up in real estate."
What? How so?
I'm still pretty bearish about the housing market, but I would caution two things:
1 - Shiller is talking about national housing, NYC may fare differently
2 - His company is marketing a product that will allow retail investors to take long or short views on housing, so he is incentivized to talk up the bearish case (easy for retail to take the bullish case currently, hard for them to take a pure bearish stance without his company's product)
I'm not saying he is being untruthful or exagerrating, but it is important to know everyone's ax in this