This interview with Robert Shiller is 20 minutes long, so here are some markers:
4:00 – He suggests more government intervention, particularly with regards to job creation.
14:00 – Housing forecasters are predicting that ‘nothing’s going to happen’ over the next few years.
17:00 – Deflation will be on and off.
18:20 – Bond bubble = flight to quality
This is also from the WSJ:
Q: I’m house-hunting, but with all the bad news coming out about the housing market, I wonder if I should wait a few months or even years. Do you think I should?
—San Diego
A: If you need a home, then keep looking. If you find a home that suits your needs and is reasonably priced compared to similar homes, make an offer. It doesn’t make sense to try to time the market—because nobody can. Unless you plan to stay in your home for only a year or two, you eventually will accrue some equity, even if you buy before housing in your area hits bottom. In the meantime, you will enjoy federal tax breaks, and avoid the rent hikes that are inevitable as demand for rental housing grows, fed by millennials entering the workforce, former homeowners who have gone through foreclosure and would-be homeowners like yourself who are waiting for home prices to fall.
Moreover, there are hopeful signs in the San Diego housing market. If you consider the July data for existing homes released by the National Association of Realtors, San Diego is performing better than the country as a whole—partly because it was one of the first markets to fall when the bubble burst. In the U.S., sales were down 25.5% in July and prices up 0.7% from a year earlier, but in San Diego, sales were down 15.2% and prices up 4.6%. Similarly, according to RealtyTrac, San Diego County is doing much better than the rest of the country when it comes to foreclosure filings, a leading indicator of a market’s health. In July, the county’s foreclosure filings, which include default notices, scheduled auctions and bank repossessions, reached 5,032, a 37% drop from a year earlier. By comparison, foreclosure activity nationwide fell only 10%.
Still, it’s premature to declare that San Diego’s market is definitely on the upswing, especially since consumer confidence remains shaky in the face of a weak job market. While the country’s overall unemployment rate stayed flat at 9.7% in July from the previous year, San Diego’s crept up to 10.8% from 10.3%. Other statistics are troubling, too: According to the San Diego Association of Realtors, the available inventory of unsold homes rose 23.3% in July from the year before, while the number of days homes remained on the market in July increased to 87 from 72 a year earlier for attached homes, and 71 from 69 for single-family homes for the same period. Meanwhile, affordability remains a problem. San Diego remains one of the most expensive markets in the country, with an average attached home price of $266,899 and single-family price of $506,540.
As you can see, the picture is too mixed for me—or anyone for that matter—to say with certainty where San Diego is in its housing cycle. But rest assured that it is a cycle, and that when it does become clear that the market is headed up, buyers will jump off the fence, prices will stabilize and interest rates may rise. So you may as well take the plunge now.
I listened to the Shiller interview for 9 minutes and turned it off. He’s just babbling with no real economic knowledge or solutions.
He suggests teacher aids. We can’t even pay for the current teachers. And where does the money come from? More taxes? Then productive people are going to be laid off to pay for those “teacher aids”. More debt spending? Then government competes with private businesses for the debt and there is less capital available private job creation.
A very interesting interview.
A Keynesian dinosaur, who suggests the government directly hire workers? He even mentions the CCC and the WPA? Is this 2010 or 1930?
“Is this 2010 or 1930?”
Good question. Another good question: Hoover or FDR?
Where will we get the money? Which do we need more, health care and teachers aids, or a twelfth, thriteenth, and fourteenth carrier strike group? Hint: No other country has more than one of the latter.
I know Glenn and Sarah aren’t talking today about the dangers of ignorance and chronic disease to our economy and National Security, but I am far more worried about job loss and healthcare-induced bankruptcy than a horde of Chinese or Indian sailors invading Point Loma.
I personally won’t be buying a house until I have the slightest sense of economic security and stability. Real security, not “let’s dress up and play war,” corporate welfare plan.
All the race-baiting, cheap labor conservatism in the world isn’t going to bring the housing market back. Teachers and health care might. That, and seeing some fat cat perp walks.
He, like most mainstream economists, are Keynesian clowns. Keynes believed that you go into deficit spending *IF* you have a savings. We are so far in debt, our nation’s credit card limits are almost equal to what we produce as a nation. No nation has ever recovered their currency with a 90%+ debt to GDP ratio.
1) How do you grow an economy with raising taxes and draining the private sector of needed wealth?
2) How do you pay off your debt unless the private sector pays more tax revenues (not higher tax rates necessarily)?
3) How do you keep faith in your currency without reducing your deficit?
We are in the perfect trifecta situation which calls for only one solution. Cutting Federal & State spending…hah, good luck with that.
I know of several people, including myself, who sold more than 60% of their stocks and have gone into cash. How can you not when you have Shiller blindly espousing something that you clearly would never tell a family man to do…live beyond their means. Then again, that is how the housing bubble happened, as well….
Jeeman,
It must be nice to have cash, I guess we should be happy for you for your infinite wisdom and foresight? My guess is that you were just lucky. The rest of us have nothing but debt and insecurity, which doesn’t count as much of a down-payment in the housing market.
As for the cause of this economic pathology? You definitely hit the nail right on the head. “Needed Wealth.” The perfect term.
Exactly how much wealth does the top 2% NEED? They’re richer than ever, especially relative to the rest of us, but are sending more and more US jobs oversees in order to accumulate… more wealth. When exactly will we be free of the Randian fetishists that run our economy?
The other 98% of Americans create the housing market. That market is on life support while the corporate welfare-sucking robber barons fortify their gated communities against the inevitable backlash.
CR
I wouldn’t say I’m lucky, but just fearful and very conservative. I make a good 5-8% a year, nothing that would make people cheer, but I try not to lose either.
How much wealth do the top 2% NEED? I don’t know, but I do know that, in a free society, it is none of my business. People have more than me, and I am happy for them. They are sending more jobs overseas because it takes $77k to hire someone and pay them $44k (including benefits). If we lowered tax upon tax upon tax, maybe they’d hire more here. Taxes affect behavior. Corporations are political party and nation agnostic. Profit only chases the dollar. If you make a dollar here and only keep less than 50c, but you make a dollar in china and keep 80c, then you go to the greater return. Our government can’t seem to understand this simple concept, and resorts to name-calling (greedy, selfish, etc). I don’t buy stocks because I like Home Depot as a store…I buy stocks based on the return in relation to the risk.
I am against corporate-welfare-sucking robber barons. The bailouts for some companies occurred not for the benefit of the company, but for the benefit of the union employees…so GM continues to make crap and we taxpayers pay to keep them employed, even though we don’t get a free car out of it.
“but are sending more and more US jobs oversees in order to accumulate…”
…..from http://news.cnet.com/8301-13578_3-20014563-38.html
Take factories. “I can tell you definitively that it costs $1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States,” Otellini said.
The rub: Ninety percent of that additional cost of a $4 billion factory is not labor but the cost to comply with taxes and regulations that other nations don’t impose. (Cypress Semiconductor CEO T.J. Rodgers elaborated on this in an interview with CNET, saying the problem is not higher U.S. wages but antibusiness laws: “The killer factor in California for a manufacturer to create, say, a thousand blue-collar jobs is a hostile government that doesn’t want you there and demonstrates it in thousands of ways.”)
“If our tax rate approached that of the rest of the world, corporations would have an incentive to invest here,” Otellini said. But instead, it’s the second highest in the industrialized world, making the United States a less attractive place to invest–and create jobs–than places in Europe and Asia that are “clamoring” for Intel’s business.
“Exactly how much wealth does the top 2% NEED?”
Current effective tax rate is 44%. The government taxes 44 cents on every dollar produced. Maybe you would like to see it at 100%?
I have been listening to economic podcasts for some time now, and Shiller’s discussion of Animal Spirits and the people getting discouraged reminded me of an economist who said if the problems are pyschological, shouldn’t we talk to a psychologist rather than an economist?
carlsbad renter – I have been a saver for my entire life. I don’t spend above my means. Wait – maybe this year and last I had to do that, due to the economy. But I had a savings cushion instead of debt. I am not even close to the top 2% in wealth or income. Stop feeling sorry for yourself – you signed every single loan and credit card – not me. Sorry to be harsh, but you were starting to whine.
I guess I owe you an apology. I guess I shoulda gone to B school or Law school and made my money in Reagan’s “Free Market,” flipping real estate and pushing paper around, eh?
You’re right, I AM a whining sad sack. My student loans were such a crap idea, as was all the work I did for the University when I was a post-doc. I’m just a sucker. And how DARE I not buy a house? Who needs to be a first time homeowner in their mid 40’s anyway?
I can’t believe I didn’t make my parents leave me money when they died. All those medical bills were SUCH a waste! And think of the cost to their employers!
So there you are. Corporate taxes are too high, business HAS to go to where they can dump their toxic wastes cheaply and screw their workers out of a living wage, or the SKY will fall! Chinese drywall and poisoned baby formula are a small price to pay for a FREE MARKET!
You’re a tool, a corporate pawn, and you spout the corporate line without a clue that you’re their bitch.