Robert J. Shiller: "Why Homes Prices May Keep Falling"

Alpine will say " I know more about real estate then that hack PhD Shiller!!!!!!!!!!!!!!!!!!!!"

Yeah, because this isn't the guy who called the dot com crash... AND the RE crash (before pretty much anybody)... AND, well, the stock market bottom (if it holds).

Hope he's right. I do find myself feeling a bit nervous as new contracts seem to have bounced over the past month (around 1000). NYC seems like such a quirky market.

Already posted.

love love love this guy!

topper, don't be nervous, the housing mess just started. nice houses will be in foreclosure within the next 2 years, that's when prices really drop. it will overshoot to the downside big time thanks to excess of leverage, persistent unemployment of ex-high earners and using the house as an ATM in the past. meantime enjoy renting as you are being paid for not buying (true while the price drops are higher than the rent you are paying).

when high inflation comes, renters will be paying owners. Won't that be sweet? If the period frm 76-79 repeats itself, prices may very well be triple in 2012 compared to today!

inflation processes are very different to each other, you cannot just assume that it'll be the same type of inflation, hence, you cannot expect to anticipate were it will show up (in which types of assets). it might not even prevent house prices from keep on going down. this is a huge issue that ben disregards to his peril (and ours imho).

be careful about discretionary income of most of new household formation (demographics is king for housing). that period you are referring to is the exact opposite to the one we are heading towards. you are talking about a period in which baby boomers housing formation peaked with triple discretionary income as young families today.

nowadays most household formation is coming on lower income levels that 30 years ago (comes from minorities and immigration, not white suburbia). it's funny that mcmansions were built when household formation will ask for exactly the opposite type of housing within the next decade.

"renters will be paying owners. "
one of several brand-new, never lived-in rent stabilized places, (one that is sweet, BTW) locked in a price for the next three years, and am guaranteed that rent will not increase faster than the rent board's inflation determination.

the last sentence of the article:

"After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997."

That certainly was not the case in Manhattan. I'm almost positive it wasn't the case for the entire metropolitan region. Am I remembering wrong?

Manhattan condo prices for sure were on a multi-year uptick by 1997.

Huh? NYC and Manhattan home prices were flat in the early 90s, which means down inflation-adjusted.

I always consider the best source for historical Manhattan real estate prices Miller Samuel.

Down in the early 90s. In line with inflation in the mid-90s. Then it took off beginning 1997.

http://www.millersamuel.com/data/index.php

"I always consider the best source for historical Manhattan real estate prices Miller Samuel."

He used to not parse out new developments. To get what you are wanting, you need to look only at EXISTING home sales. Unfortunately, as imperfect as they are, the C-S indices are the only ones that do that for such a time frame.

So if anything the miller 90s figures for manhattan over-state it a bit.

30: again, NY RE held in for a year after the 87 stock crash...NYRE tanked 40% 88-89...went flat until 92 or so...rallied for years with a minor post-9/11 pull back...topped in late 07...down 30-45% as I write...conspicuous is that NYRE prices were still going down well after the stock mkt had completely retraced the 87 crash...split hairs if youd like but these are the basics

Miller opines on this very topic:

http://matrix.millersamuel.com/?p=4660

I think he is on the side of the more bearish on this one.

1rcollins2: aside from disagreeing on the "tanked 40% 88-89" (me saying more like 89 to 91), that was my point: that prices started heading north towards the end of 1992 and by 1997 were SUBSTANTIALLY up. I think the Miller Samuel data is bad during this time period because of what their data sources were, which I think were more a few large brokerage firms since Coops were not recorded till 2004. What they got as data was skewed to the high side because during that time period, the brokerage firms which were their source of data were still working much more on "higher end" transactions (and Condo sales, which were also much higher end and publicly reported). I think they totally missed a HUGE mass of low end properties which were trading dirt cheap in 1992, and during the years 1992 to 1997 these firms gradually started doing more lower end transactions so the data "met in the middle" and it seems like prices were stable as a result, when in fact this doesn't reflect actual history.

The most salient example I can think of in both the Miller Samuel reporting and Corcoran's reports (which look so much alike it's what leads me to make the above statement about getting too much of their data from only the large firms during that time period) is looking as the metrics of studios on Chelsea from 1992 to 1997. I still have in a file in my office Corcoran's mid-year 1997 report because when I looked at it the first time, it was so obvious that there numbers for this were SO amazingly off that it was pretty much 'proof' in my eyes that the reports were meaningless as an objective measure of what was really going on in the market.

"Hope he's right. I do find myself feeling a bit nervous as new contracts seem to have bounced over the past month (around 1000). NYC seems like such a quirky market."

A bounce after 50-75% declines doesn't mean a whole lot... especially when the prices are continuing to decline. Of course sales pace had to bounce after the market came to a standstill... but just note at what prices the apartments are trading for.