Robert Shiller Sees Possibility of Huge INCREASE in Home Prices

the most important part of the article:

"It is entirely possible that even with the bad news we are getting, home prices could start a major increase,"

come out bears, where are you?

Good thing you're not in NYC, where we're running, oh, 2 years behind...

I really dont care what he thinks " could or might happen"...real prices in NYC are declining and continue to decline. you guys sre still holdin onto yahoo shares at 500 and hoping for the market to comeback....its just sad at this point.

and not that long ago, Shiller said home prices could decline for years to come.... Talk about jumping to the other side.

Ironically, alpo claimed we didn't fall in the first place!

So, alpo, if you're calling a bounce, does this mean you're finally admitting the crash?

I love how you ignore the title of the article "US home price gains may NOT be sustainable"

How you twist crap around to suit your own stupid bullish needs is why I don't talk about religion.

What is the reason prices would start to zoom up?

* Higher salaries? No.
* Lower unemployment? No.
* Interest rates declining? No.
* Lack of supply? No.
* Easy credit? No.
* Prices at historical lows compared to rent? No.
* Prices at historical lows compared to income? No.
* Stock market gains? Maybe, but still down a lot from where we were last year.

President - What indicates that real estate prices will soon be zipping upward, particularly in NYC? Just "because"?

Click on the idiot's link and look at the most popular article of the day on Reuters:

US foreclosures spike in new regions in 3rd qtr.

> I love how you ignore the title of the article "US home price gains may NOT be sustainable"
> How you twist crap around to suit your own stupid bullish needs is why I don't talk about religion.

I love how he lied and claimed "huge increase" when that was never said...

But, its not like we didn't know alpo was a moron.

Remember, this is the guy who said "MANHATTAN IS NOT DOWN 20%. SHOW ME JUST ONE EXAMPLE!"

nyc10022 - To be fair, Schiller DID say that "major increase" was possible, and that it would depend on people's "animal spirits" (whatever that is) and "speculative impulses".

In other words, it could happen, even if it makes no sense - that is, another irrational bubble could form.

Isn't he saying that there is a small bubble in the works? And the bubble growth has no relations to economic factors such as unemployment?

He mentioned "possible big increase", but also hedged himself and said he's very weary of it when looking at past historical trends of a recession. This was all on kudlow report- probably due to the nature of the show, he was bulled up for Kudlow.

> In other words, it could happen, even if it makes no sense - that is, another irrational bubble could form

I agree with you there, but alpo simply lied about the magnitude of the possible increase.

And, of course missed what areas he was talking about. OK, alpo didn't miss it, he's intentionally hiding the fact (he's been the guy to point out the difference when it WAS in his favor).

It is "entirely possible" to make 3 straight passes at the craps table. But I wouldn't bet on that, either. Shiller has become the Jean Dixon of Real Estate. Make 200 predictions and at the end of the year pick the 5 which came true and say "Look!!!! I predicted this would happen!!!!"

Lets be fair... Shiller has been pretty spot on.

He pointed out the bubble with real data way before anyone else...
Then he coined the measure everyone now follows.
And he called the 2000 crash in his book...

Oh, and how can I forget.... we passed around his article saying "I'm not saying it can't go lower, but stocks are undervalued right now" article..... which came out THREE DAYS before the bottom.

And, no, he wasn't writing those articles in the months before.

if they increase then they just have that much further to fall in order to reach a true fair market value.

some bears feel the need to hedge a bit too much. he's worried that the gov't's efforts may actually work in propping up prices. but that's all it will be, a prop. and then a drop.

> if they increase then they just have that much further to fall in order to reach a true fair market
> value.

Only if they are above true fair market value.

10022, of course. are you saying that they are at fair market value now? or that fair market value is above today's prices? just askin'

Nah, I was just playing with the logic. I'm not even sure if we're talking stocks or RE specifically. Which are you asking about?

when Shiller said that price gains might be unsustainable, he only referred to San Francisco and Minneosta, not NY.

The President OF BOTSWANA Knows Nothing

BUY NOTHING The Next Leg Down is just Underway.. Stoxx Swoon Unemployment UP Dollar Down
ITS all a Nasty picture

Sonds like like what he is saying the following:
The difference between a suckers' rally and a bubble is the time lenght but the end results is the same. i.e. Prices can keep on going up for a while -know one knows the exact date and time of the next correcton- but in his opinion this is not going anywhere in the long run (or gains may not be sustainable).

I meant "no one knows" not : ...know one knows the exact date...

"when Shiller said that price gains might be unsustainable, he only referred to San Francisco and Minneosta, not NY."

Why would he talk about how sustainable price gains are in Manhattan when there aren't any?

Moron.

I was actually referring to other articles he's written. He specifically notes that Manhattan is behind the curve.

let's see those articles.

Prices in NY up 0.3%.

A small victory for someone?

prices up distorted by drop out of tax credit (until extended) for 1st time buyers.

Sort of extended to April 2010.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6e4fQQHzg6U

> Prices in NY up 0.3%.
> A small victory for someone?

Thats not Manhattan. Even alpo knows that...

Actual Manhattan data - median psf fell *again*, to under $1k psf for the first time in a long time.

I've been as bearish as anyone, and I don't know what Shiller is talking about, but let's be honest:

There was an epic, unprecedented decline in home prices. Eventually, those prices declined to significantly below replacement value, which caused construction to grind to a halt. At the same time, population continues to grow. The economy is growing again. Demand for housing has inched up. The stock market has had a huge rally (which may or may not be sustainable, obviously). Housing prices have been relatively stable for many months (a bottom?). It is certainly not hard to imagine a major bear-market rally in housing. In fact, housing prices are so low in many parts of the country that it would require demand to fall to more or less zero for the prices to go any lower (as in Detroit, where houses regularly fall for 50k. Is the entire country becoming Detroit? no). This doesn't seem shocking.

Manhattan is something different. That said, the incredible turnaround for the finance industry and finance compensation is having, and will continue to have, a big impact on NYC prices. It's silly to try to deny it. Prices are down 20%-35% from the peak (more in a few cases), but at the new price point things are selling briskly. Perhaps that's temporary, but it's silly to deny that it's happening.

nothing in the $1.5 million + range is selling briskly.

All real estate is local! The S&P/Case-Shiller indices are virtually useless for tracking/predicting Manhattan residential sales. Case-Shiller does not include sales of co-op and condo apartments even though those property types account for 99% of what is sold in Manhattan. What I do see impacting apartment prices in Manhattan is the rising unemployment and the decline of consumer confidence.

http://realestategeezer.com/2009/10/27/home-prices-continue-to-improve-while-consumer-confidence-declines/

> nothing in the $1.5 million + range is selling briskly.

hr, cc is right.... and its actually overall. I don't think you can call anything brisky...

inventory has been consistently increasing.... starting from a point that was historicall high in the first place...
http://www.urbandigs.com/charts.html

Take a few minutes and watch this interview with Shiller and pay attention to 1:43 - 2:10 of the segment.

I don't think he sounds particularly bullish. For the bulls, he does mention that there is a possibility of continued improvement. You can decide for yourselves whether he sounds more bullish or bearish overall.

http://www.youtube.com/watch?v=4UMIi2GhJ2c

nyc10022 and columbia county,

i have to tell you, i really wish you were right, but the facts are otherwise. i tend to agree that this is a temporary state of affairs, but right now apartments are selling relatively briskly. two apartments i was looking at in the 2-2.5 million range just went into contract above asking price after less than one week on the market. did they sell at peak prices? no, they will close at prices down 25% or more from the peak. but they sold quickly and with competitive bidding. and this is not an uncommon situation right now.

do i think prices are about to reinflate? no. but it's silly to justify a position--either bullish or bearish--by denying or ignoring facts on the ground.

"the facts are otherwise" = "apartments i was looking at"

Nice try, but thats a creative use of the term "facts".

The actual data just doesn't support your claim.

sorry, important correction:

"the facts are otherwise" = "two apartments i was looking at"

""the facts are otherwise" = "two apartments i was looking at""

somewhere, it was an example, no need to jump down happyrenter's throat. Have you seen many apartments that are priced 25% down from peak languishing on the market with no bids out there? It's kind of empty rhetoric until you have.

I am a buyer looking in the $2-3 million range and agree a lot with what happyrenter has stated. I have experienced the same thing. I bid on several apartments in the last couple of months and lost them. I am not giving low ball offers but on average 10% below ask. The accepted offers were less than 25%-30% off peak. It may be the special market that I am looking at (pre-war in Carnegie Hill) which may have experienced less of a decline.

I do agree with all the economic factors that would lead one to conclude prices are not going up (jobless recovery, higher taxes, tight credit, etc.). I also think certain areas in Manhattan will experience more price declines.

But I do see more bidders for the area that I am looking at and would expect more bidders with Wall Street bonuses in the winter/spring possibly keeping prices flat and maybe pushing certain "prime/quality" apts up slightly. I see small, dark apartments or apartments with layout problems not selling but good apartments are selling briskly and very close to ask.

"It may be the special market that I am looking at (pre-war in Carnegie Hill) which may have experienced less of a decline."

Ha... well I did say that the UES was poised best after the crash! It was already trailing the rest of Manhattan.

BTW, per UD, the larger apartments are actually doing worse. 30-40% below peak was what he noted... though, again, I'm not surprised if UES is the exception.

I never tire of kicking Shiller whether he's up or down. Read into that what you will, but as I have commented here and on my blog (http://malcolmcarter.wordpress.com/2009/10/29/kicking-him-when-hes-down-and-up-is-just-fun/), even a clock is right twice a day. (And I'm a broker!)

how do people know what the accepted offers have been in the last couple of months? the units can't have closed yet. brokers?

> even a clock is right twice a day.

But when a clock is right 24 times a day, perhaps its time to stop calling it broken.
;-)

> (And I'm a broker!)
Funny, the class of people who manage to be wrong more than a broken clock...

aboutready,

i happen to know that the accepted offers on these two apartments were over ask because in one case i bid on the apartment and didn't get it, and in the other case i wanted to bid but never got to because i wouldn't go high enough--and the numbers in both cases were over ask. so while i don't know the exact numbers, i know approximately.

listen: if other folks are seeing well-priced apartments languishing on the market, good. i'm a potential buyer. i am just reporting my experience of the market, that's all.

hr, thank you for your clarification, but did you bid at ask? and if so, that to me would imply a fair discount given what i know of your knowledge.

but they haven't closed yet. another issue and a hurdle.

i'll agree with you to some extent, but only in a very vague way. i'm seeing things trade all over the place. but i was doing a comps review for someone, and in a very prime neighborhood i only found about 13 properties that traded over $2mm in the last 60 days. only one hit $4mm, and nothing was above that. nothing.

aboutready, i certainly agree that the apartments had a 'fair discount.' that is my point. a fair discount seems to be somewhere in the 20-35% off peak range depending on the situation. and when apartments are priced at the right place in that range, they trade. at least for now there is at least a temporary floor for prices. is it a bottom? i can't say. but i think it is fair to say that the market is active, albeit at lower prices.

AR - closings lag behind contracts by anywhere from what? 60 - 120+ days? (between coop boards and mortgages). So closings in the last 60 days are probably not really representing what has been happening in the market in the last 30 to 60 days.

hr: i think this is a question of market depth. Were these the only two "fairly priced" apartments on the market at this time in your market? If so, what do you think the bidding would have looked like if all the inventory in your market was fairly priced? Will you go out an bid on the other inventory already in the market now that these two bids failed?

If the market depth isn't there, then this isn't enough to clear the market, and pricing just keeps going down.

good points. another reason taking two apartments and what the brokers told over actual data doesn't help much.

Same logic was used to explain how we weren't in a crash (when the data showed we actually were).

skinny,

i think the point is that prices are not, currently, going down. they have been stable since march or april. the reason is that most apartments seem to be able to attract interest somewhere between 20 and 35% below peak prices. believe me: i am not a real estate bull. far from it. but the bearish argument is a bit harder to make right now. and it doesn't help the argument to evade facts.

somewhereelse, if you have "actual data" to demonstrate that prices are currently falling and that apartments are not selling at a fairly healthy clip, please share it. i certainly never argued that there was no crash, and aboutready and others can tell you that i have been a vociferous real estate bear for a long time. i sold my apartment near the peak because i thought prices were unsustainable, and i have held off buying with the expectation of substantial asset deflation. there has been substantial deflation, but apartments are finding buyers at a higher price level than i would have thought. if you have data to share that refutes my argument, do so by all means. i hope you are right.

> and it doesn't help the argument to evade facts.

Agreed... but ignoring the data is, in fact, evading facts. Last set of market reports were some up, some down overall medians, but all showed a decline psf to the lowest in years.

And claiming that this is true since March... thats not ignoring the data, thats arguing against it.

Just not true...

"somewhereelse, if you have "actual data" to demonstrate that prices are currently falling and that apartments are not selling at a fairly healthy clip, please share it. "'

As I've said a few times, the market reports have been out for a while and well discussed here. Go to millersamuel.com if you need to.

> they have been stable since march or april.

This is specifically countered by the data. The Q2 over Q1 was down... as was contract data.

hr, i can concur with that, except that i'm seeing more stress in the smaller units market, and the very large units. for the smaller units, i can only surmise that the pent-up demand for first-time buyers was pushed forward artificially earlier and now there aren't as many buyers in that market. very little is trading in the trophy apartment category, so it's a tough market to analyze. the standard 2/2 market also seems to be continuing its descent.

but what i look at has a definite lag time in reporting, and i'm not at open houses for these units, so in real time this could be wrong as well. but as i wrote earlier today, i wouldn't be stunned at prices increasing temporarily during the correction process. i'm not a believer in the efficient market hypothesis, particularly pertaining to residential real estate.

Oh, hr, I know your view. I've been here longer than you. I just thought you were losing the faith. :)

My point was simply that you shouldn't be surprised by trades on the way down, and they're not flat. They just aren't declining as spectacularly. We were cheerleading about single digit quarter increases on the way up. Why aren't they just as telling on the way down?

I think one reason why we are holding at down 20-35% is that is the amount of equity that people have before they have to go in for a short sale or foreclosure, and, I would say, the banks haven't yet had their come to Jesus moment.

skinny, no offense, but didn't you just contradict your entire argument:

"I think one reason why we are holding at down 20-35% is that is the amount of equity that people have before they have to go in for a short sale or foreclosure, and, I would say, the banks haven't yet had their come to Jesus moment."

what is your definition of 'holding' other than 'prices not changing'? 20-35% down is significant price movement, but prices do seem to have stabilized. the market reports you cite as showing 'some up, some down' also confirm my point: prices have basically stagnated since the spring, while activity has picked up at the lower price point.

the long-term picture is much murkier. economic fundamentals are poor and unemployment is high. on the other hand, the federal government has committed itself to an enormously expensive alliance with the financial services industry. the remaining public institutions face decreased competition, not to mention a spectacularly favorable interest rate environment. if the obama administration manages to regain its sanity and reject bush-style crony economic policy then i have no doubt we will see more serious declines. but let's be clear: the federal government has facilitated an enormous wealth transfer from the tax payers to the people of manhattan. that can't but help prop up real estate prices here.

Good point. Yeah, there's admittedly tension in the position. I should have written more clearly.

We rapidly decreased to 20% down. We're kind of drifting down for a while -- compared to the cliff diving we went through, I guess the best way to put it is that it feels like we are "holding". Within the range of 20-35% down, though, the hold/drift down can certainly still have single digit q over q decreases, which is what we have.

That said, I can certainly identify with the feeling that we are "holding" from watching individual trades because we humans are particularly bad at assembling individual data points into trends, perhaps that's why I didn't write very precisely (I "feel" the exact same thing). However, the data says we are still declining. And since the market isn't clearing the supply, that says the future is down.

skinny, again you cite this supposed 'data.' but the actual data, as somewhere tells us, is " the last set of market reports were some up, some down." again, like you so accurately put it, holding.

i have seen no evidence that prices have drifted down from an average of 20% to an average of 35% below peak over the last few months. plenty of apartments were down 35% from peak by march of last year. you keep telling me that the data says we are still declining. what data?

i have some real issues right now myself. i am seeing some properties trade for far more than i think they should be trading for. and i see some that are coming in extremely low.

i don't know how to reconcile this. but if i were to to compare it to that other vastly non-fundamental tied market, i'd say we're seeing something similar. the VIX is up 25% in the last week or so? have fun people.

Ok. Fair enough. I looked at the Q3 reports again (I only too-quickly glanced at them when they came out) -- It is fair to say prices are flat.

BTW: I didn't say that prices had drifted from 20 to 35% down, only that we were in that range.

so the question becomes:
is the recovery in financial services going to prop prices up at this level, aided by current low interest rates and almost certain future inflation? or is the high unemployment rate, accompanied by continuing economic uncertainty and perhaps a decline in equities, going to lead to a future crash?