rshillWith home prices soaring in many U.S. metropolitan areas, there’s already talk of another home price bubble.

Just last week, researchers at Trulia Inc. identified more than a dozen markets around the country where home prices are slightly ahead of fundamentals — including the Dallas area.

Most economists say that new worries about the recent rate of U.S. home price appreciation are overblown.

And that’s the view of probably the foremost expert on housing bubbles, Robert Shiller.

Shiller — co-creator of the closely followed S&P/Case-Shiller Home Price Index and a newly minted Nobel laureate in economics — attended a housing conference Friday at the Federal Reserve Bank of Dallas.

“Expectations have been gradually going up; they haven’t reached bubble-level expectations yet,” he told the group.

Shiller said price bubbles in housing and other commodities have more to do with psychology than economics.

“A speculative bubble is a kind of social epidemic of enthusiasm,” he said. “The contagion is spread by word of mouth and media-driven and also partly price-driven.

“In a speculative bubble, the price increases and the media stories generate attention.”

That’s certainly what happened starting a decade ago when the U.S. saw a record jump in housing prices.

“In 2004 and 2003, people thought they had a money machine” because of home price appreciation in many markets, Shiller said. “They were wrong about those expectations.”

Shiller was one of the first economists to warn of a dramatic home price correction, and, of course, he was right.

Nationally, home values plunged more than 40 percent, with some cities taking especially big hits.

With housing prices across the country up more than 12 percent this year, it’s understandable that some consumers are starting to fret about where housing is headed.

“Lots of people are worried that home prices in their city will outpace them,” Shiller said. “Maybe a housing bubble is more damaging than the others.

“We have a policy that encourages people to put their life savings into one undiversified investment.”

Shiller said his fame with regard to housing research has garnered invitations from around the world to discuss housing price trends.

“I tend to get invited to places that have bubbles,” he said. “Ever since I won that Nobel Prize my life has been busier than it’s ever been. You wouldn’t imagine.

“I’m really freaked out when people say, ‘I’m honored to meet you.’”


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