The local Case-Shiller Index slowed its ascent in October, but you won’t see many current homeowners complaining about a 19.72% increase for the last 12 months:
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| October ’13 |
The U.S. housing market could be in the early stages of yet another bubble, warned Robert Shiller, co-founder of the Case-Shiller index.
“In the housing market, it has its own momentum right now as people see it coming back. We’re sort of in the beginnings of another housing bubble,” the Nobel Prize-winning economist told CNBC.
Compared to a year earlier, prices were up 13.6 percent, beating expectations of 13 percent and marking the strongest gain since February 2006, when the increase was 13.8 percent.
Housing prices have been rising since early 2012, and a rebound in the sector has helped the U.S. recovery gain steam.
But the more subdued monthly gains “show we are living on borrowed time and the boom is fading,” David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement.
“The key economic question facing housing is the Fed’s future course to scale back quantitative easing and how this will affect mortgage rates,” he said.
“We have a futures market that’s predicting the increase won’t stop until after 2018 so we still have time to go, but it might be weaker,” said Shiller.
“Things are changing fundamentally, and it seems people are less excited about big homes,” said Shiller, referring to housing trends. “The financial crisis kind of put a damper on that enthusiasm, especially big homes far away from the city center. There’s this new urbanism afloat. Housing is not one thing. It’s not monolithic. I think there might be a trend toward more urban living.”
“Living on borrowed time” – Blitzer
What kind of statement is that? It’s usually what you would say about somebody who was dying.
Is the market going to die if we don’t have double-digit gains in housing? Guys in power positions like Blitzer should be more responsible about what comes out of their mouth.
At least Shiller is consistent about being cautiously vague in his statements.
“There’s certainly room for home prices to continue rising in the coming year,” said Dana Saporta, an economist at Credit Suisse in New York, who projected a 13.7 percent advance in prices in the year ended in October. “As home prices continue to rise, more and more homeowners who are underwater on their mortgages will see their financial situations improving. Just getting out of that underwater position should be a big help to the economy.”
“In the housing market, it has its own momentum right now as people see it coming back. We’re sort of in the beginnings of another housing bubble,” the Nobel Prize-winning economist told CNBC.
Given that housing always becomes a bubble before bursting, 3 years ago was also “the beginnings of another housing bubble”. How many of todays buyers would love to take a time machine ride to 2011 for a home purchase?
there’s always a bubble for the people who aren’t making any money.
“Things are changing fundamentally, and it seems people are less excited about big homes,”
Perhaps people are being practical nowadays.