Robert Shiller: Conan the Housing Contrarian

by Peter Thomas Ricci


Robert Shiller, the noted housing economist, is one of the industry’s most influential authorities, and he’s been notably skeptical of the housing recovery.

News regarding the housing market has been uniformly positive the last couple of weeks. New home sales in January hit their highest level since 2008. Negative equity is improving. Contract activity has been strong, and the mortgage markets continue to show signs of healing.

Yet, despite all this good news, a powerful authority on the housing market – Robert Shiller, the economist whose name makes up half of the hugely influential Case-Shiller Home Price Indices – is not yet ready to jump on the housing recovery bandwagon.

Robert Shiller – Guru in Doubt?

In a recent interview with the Wall Street Journal, Shiller fleshed out several of his ideas on the housing market, balancing any compliments about the industry with a healthy dosage of skepticism:

  • Though commenting that the current trend in home prices “may well be the turning point,” Shiller still fears that the recent home price increases – which saw values jump by more than 7 percent in his own index in 2012 – could be a fad.
  • “It could be like the 2009-10 upturn where we saw home prices rising right after President Obama took office and right after the home-buyer tax credit was instituted,” Shiller said. “In that upturn there were some cities that did quite spectacularly. And then that fizzled. I’m not too sure that this one will extrapolate either.”
  • And the reasoning behind Shiller’s skepticism is logical. The foreclosure boom, he explained, has receded in recent months, and with less foreclosure sales on the market, there has been less downward pressure on home prices – thus, an illusionary increase in home prices could be in the works.
  • “People might be deceived by this by looking at the indexes,” he said. “The question is whether the gains will be sustained.”

Is the Housing Recovery Sustainable?

The question of sustainability, though, is one that Landon Harper of @properties is comfortable with.

“We’ve been extremely comfortable, with multiple offers on many of our properties,” he said.

The key, Harper added, is consumer confidence, something he’s seen a big jump in the last year. After sitting on the fence for the last three years, Harper said consumers are finally ready to make their home purchase, and he sees sellers gradually returning to the marketplace to catch up with buyer demand.

But what are your thoughts? Is Shiller right to be skeptical, or are there too many good signs in housing right now to see anything but a recovery?

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