When it comes to real estate quotes, this guy is gold:
“I describe the current boom in U.S. home prices as the third largest boom since 1890. And so it’s big, and people are starting to think that housing is expensive, and that could lead to a turnaround and a drop in home prices,” Shiller said in an interview with Yahoo Finance at the World Economic Forum in Davos, Switzerland. “But I’m not ready to forecast that yet.”
“The housing market, when it starts to slow, that’s a leading indicator that it could turn down,” Shiller said.
Shiller described the housing market as “remarkably trendy,” having gone up smoothly for about the past 50 years. Housing isn’t as easily tradable as equities or other financial assets, Shiller pointed out.
“You don’t have the smart money going in and out from day to day,” Shiller said. “[The housing market] shows momentum, and that momentum is slowing down a bit. There could be a reversal in home prices and a recession. But I’m not giving it a probability of greater than 50% for this year.”
The key factor leading to a contraction are changes in confidence, Shiller said. And on that front, President Donald Trump has delivered a bump to the housing market.
“I think Trump does have a psychological boost for the housing market because of who he is. He kind of exemplifies lavish living. He writes books about success. He’s our first motivational speaker president,” Shiller said. “His motivation will tell you that you have to live the life of a successful person.”
“That’s an important reason why people buy homes,” Shiller added. “They want to be part of the successful people in the country.”
Watch his 10-minute interview with more nuggets here: