Yale University economist Robert Shiller believes housing might have seen the lowest point it will for some time, but the health of the job market will be the key factor in the future direction of home prices.
Shiller offered his comments as a housing price measure he helped create, the Standard & Poor's/Case Shiller index, revealed that prices for homes in the U.S. rose 2% in August vs. the same month in 2011. Many economists and housing market watchers have grown more optimistic that the sector is truly turning this year, and the index also showed that home prices were higher in all but one of the 20 markets it uses to gather its reading.
"This may well be the bottom for housing for some years," Shiller said in an interview, but he's not convinced it's the end of uncertainty. Housing, and the broader economy for that matter, still have to contend with the upcoming presidential election, the looming deadline for avoiding the "fiscal cliff" and continuing questions about the steadiness of Europe's economies.
Adding to his worries, Shiller cited a Congressional Budget Office report that said cuts to government spending, paired with tax increases (in short, the fiscal cliff) would run the risk of pushing the U.S. back into a recession, dealing a new blow to the housing market. GOP presidential candidate Mitt Romney has promised that, if elected, his administration would strive to reduce federal spending.
Longer term, single-family home prices likely will come under downward price pressure as retiring baby boomers sell their houses to move to other locations, including cities, and as younger people choose urban dwellings over suburban living, Shiller said.
However, he also said there's good news for the home market at the moment, even if further out, housing could have a new set of problems to deal with. Data released earlier this month showed that housing starts rose 15% in September to an annual pace of 872,000, the best performance since mid-2008, while the National Association of Home Builders/Wells Fargo Housing Market Index this month reached 41, its best point since June 2006.