While the real estate market has been bubbling, Robert J. Shiller doesn’t think we are in a real estate bubble. At least not yet. Shiller who, along with Karl Case, developed the S&P/Case-Shiller Composite Home Price Index, wrote a column for the this Sunday’s New York Times explaining why 2013 is not 2004.
The Case-Shiller 10-City Composite Index has seen a real, inflation-corrected rise of 18.4 percent in the 16 months ended in July, Shiller said, only about 4 basis points below the largest 16 month increase during the years-long run-up to the 2008 financial crisis. Is it possible, Shiller asks, “that we are lapsing into what I call a bubble mentality – a self-reinforcing cycle of popular belief that prices can only go higher?”
He sees a lot of differences between then – the pre-2008 period – and now and uses the results of this year’s installment of a survey he and Case have conducted since 2003 to illustrate them. The survey involves sending questionnaire to a random sample of recent homebuyers in Boston, Milwaukee, Los Angeles, and San Francisco. The results from the most recent survey conducted in May and June suggest, Shiller said, that we are not in a bubble now but there are troubling signs we may be heading into one.
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