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"Another Bubble" in Housing? It Could Happen, Says Yale's Robert Shiller

Posted Jul 13, 2009 08:30am EDT by Aaron Task
The slowing rate of decline in home prices is likely to continue but the housing market is "still in an abysmal situation," says Robert Shiller, a professor of economics at Yale. The co-creator of the S&P Case-Shiller Index, which tracks national housing prices, says the housing market could "languish for many years," due to the "huge inventory" of unsold holds, "shadow inventory" of homes kept off the market by banks and other potential sellers, and "a lot of financial problems."

But incredibly, the author of Animal Spirits (with George Akerlof), The Subprime Solution and Irrational Exuberance believes "there could be another bubble" in housing, once the excess inventory is worked off. "This is not my more probable scenario [but] people have gotten very speculative in their attitudes toward housing," he says.

Shiller cites Boston as one area for a potential echo-bubble in housing, noting its typically volatile market did not fall in the past two years as dramatically as "more bubbly" cities like Phoenix. The professor and bubble expert isn't predicting it, but the fact he's even mulling the possibility is eye-opening, to say the least.

Whether you think the housing bubble is going to collapse further or reinflate, Shiller's firm MacroMarkets recently listed two indexes on the NYSE Arca that allow investors to place their bets (or hedge their own housing exposure): The bullish Major Metro Up (NYSE: UMM) and the bearish Major Metro Down (NYSE: DMM).

Going forward, Shiller hopes to offer similar securities for specific cities and geographic areas.

164 Comments

Scott
Scott - Monday July 13, 2009 10:07AM EDT

This guy needs to get a real job. Pandering and fear mongering seem to be his best skills. The housing market does not need more chicken little, it needs confidence. There are tremendous deals out there now, and low interest rates. Folks with decent jobs should be buying, not sitting on the sidelines worrying about what this academic putz is cooking up. You can still do FHA with a minimal down payment.

J
J - Monday July 13, 2009 10:08AM EDT

Hurry! The (Obama) gravy train is about to leave for another give away trip. Now's the time to go buy a $300K house with just your unemployment checks... and don't worry.. you can't fail as there are (it seems) 5 or 10 new bailouts every day out of DC, and one has to be right for you! And the realtors will just LOVE you for it too! REMEMBER: STRONG INFLATION = STRONG AMERICA!! Well it worked before, didn't it?

Yahoo! Finance User
Yahoo! Finance User - Monday July 13, 2009 10:09AM EDT

This guy is a clown. Of course when you prop up prices with tax dollars its going to take longer for things to come to fair market values. I live in Boston and am waiting for the fake government issued demand to work itself out before I even consider buying a house. It doesn't take a Yale PhD to figure out that one. The only problem with this guy is that A. he doesn't live in the real world and B. his political views are blinding him. Stimulus dollars aren't even 6% spent yet, but the bailouts for banks are creating this scenario. When all the tax money is thrown around, people are fed up with any more spending and inflation starts to rear its ugly head, that's when I'll consider buying. In my neighborhood, people have big houses and can't afford furniture, but house values are still pretty high. I can't wait until they're out on the street and a prudent investor, like myself, can step in. I only hope that I don't get taxed to death in the meantime and all my money goes to keeping these people in their homes.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Monday July 13, 2009 10:10AM EDT

can you people get sum1 on your site tat has sum common sense.... for the past year all i have seen is "hand talkin'" dipsticks and one person tat wus so dumb they couldn't get out of the rain.

Yahoo! Finance User
Yahoo! Finance User - Monday July 13, 2009 10:10AM EDT

Bush, Cheney, and Phil Gramm left a pile of smoking rubble behind. All Obama can do is stir or maybe write his name in the ashes.

Stephen
Stephen - Monday July 13, 2009 10:11AM EDT

To fredgyporquinho: Only 24% of the money has been so-called 'printed' with less than 10% spent. I'm a republican but at least I know the FACTS.

Len T
Len T - Monday July 13, 2009 10:12AM EDT

I guess if this guy says there will be another housing bubble and he's right then he will be able to come back on tech ticker and brag how he exactly called another bubble. If he is wrong nobody will remember that he said this and he'll appear cuz he said something else.

Ian
Ian - Monday July 13, 2009 10:13AM EDT

Housing prices will eventually go up drastically, but so will the cost of everything else. What else would you expect to happen after doubling the money supply? It doesn't take a genious to figure out that the more money you print the less it's worth, even if you use a pretty word like "stimulus".

Yahoo! Finance User
Yahoo! Finance User - Monday July 13, 2009 10:14AM EDT

RUN FOR YOUR LIVES, THE DOLLAR IS COLLAPSING.

Katy C
Katy C - Monday July 13, 2009 10:15AM EDT

Housing prices will probably soar, but it will cost $2,000 for a dozen eggs.

J
J - Monday July 13, 2009 10:15AM EDT

Hurry! The (Obama) gravy train is about to leave for another give away trip. Now's the time to go buy a $300K house with just your unemployment checks... and don't worry.. you can't fail as there are (it seems) 5 or 10 new bailouts every day out of DC, and one has to be right for you! And the realtors will just LOVE you for it too! REMEMBER: STRONG INFLATION = STRONG AMERICA!! Well it worked before, didn't it?

JD
JD - Monday July 13, 2009 10:16AM EDT

It's 5 years before anything happens in housing, then there is Comercial real estate1 trillion in loses or more. Not till Barry Obozo is removed from office that the economy even has a glimmer of hope, government never gets anything right, never fixes anything. Barry Obozo is 100000000000000000000 times worse than Carter, his economic theory is Communism where the state owns everything! Just look who caused this diaster the Democraps with liberalizing money for mouches with all Demonicrats feeding of the Fanny Mae Freddy Mac and skimming billions for themselves, we are in DEEP s--t.. If Obama stays everything turns to s--t for 20 years! Wake up America a revolution is needed by removing and indict every democrat like Frank Dodd Obama, at least 500 more that is in the DNC including the Clintons for bank fraud to murder! COMPLETE Dusting and Cleaning OF the DNC!

Stephen
Stephen - Monday July 13, 2009 10:17AM EDT

JASPER M: level recovery.........2013 I hear you but not until 2015 at the earliest...

taopraxis
taopraxis - Monday July 13, 2009 10:20AM EDT

Live and let live. If you love the government plan, buy government bonds. If not, buy gold. To each his own...

Yahoo! Finance User
Yahoo! Finance User - Monday July 13, 2009 10:22AM EDT

Hey, sjmosu1 if the deals are so good why aren't you out snapping them up? Real estate agents are not professionals, they are parasites - and you sound just like one.

PritthaB
PritthaB - Monday July 13, 2009 10:25AM EDT

I think there is a "bubble" in celebrity economics professors. Not that I'm predicting it, but them again I might be. You can read more about it in my new book.

John
John - Monday July 13, 2009 10:27AM EDT

Shiller should have gone to Ghans with obama. They both could have done the US a favor by sipping the Koolaid... that left over from Rev Jones

Yahoo! Finance User
Yahoo! Finance User - Monday July 13, 2009 10:27AM EDT

You gota have a big head to name an index after yourself :)

KH
KH - Monday July 13, 2009 10:28AM EDT

Shouldnt this guy give fair disclosure he has an index to "shill" ??? It is in his OWN SELFISH interest to make the housing story a mystery. Sorry Mr. Shill, we are headed up, not down. You dope.

Yahoo! Finance User
Yahoo! Finance User - Monday July 13, 2009 10:28AM EDT

To much inventory not enough buyers = more price reductions ...Those who wait it out... Win...

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