This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Nobel Winner Robert Shiller Says There Is No Housing Bubble... Yet

NEW YORK ( TheStreet) -- Yale University Professor Robert J. Shiller has just won the 2013 Nobel Prize in Economic Sciences for his work on asset prices, along with Eugene Fama and Lars peter Hansen.

Shiller's study of how stocks and bonds are priced found that in the short-term markets are not always efficient and do not necessarily reflect fundamentals, because market participants are often irrational.

For those who closely follow the housing market, Shiller is a well-known name. He developed the widely followed S&P/Case-Shiller Indices that track home prices, along with Karl Case.

His book Irrational Exuberance in 2000 warned that the stock market was in a bubble, surrounding activity in the dot-coms. The 2005 edition of the book spoke about the bubble in real estate.

So if you haven't been paying attention to his views on housing, you might want to sit up and take notice now.

In recent months, Shiller has warned that some regions are looking "bubbly", referring to the dramatic annual price gains in cities such as Las Vegas and San Francisco.

But overall, he does not believe we are in a bubble..yet.

"Home prices right now are just reasonable. They are where they have been for a century in real terms. They are not high or low. They are OK," he said in a Bloomberg Television interview last week.

Home buyers do not appear to be displaying a bubble mentality either. Shiller just recently conducted a survey of recent homebuyers.

The short-term expectations were somewhat high, with respondents saying they anticipated a 5.7% increase, on average, in the next year. But in the bubble years of 2004, buyers projected an even higher 8.7% increase.

Moreover, buyers longterm expectations appear quite modest at 4.2% a year for the next 10 years. At that rate, if consumer inflation is modest at 2% a year, we wouldn't return to the December 2005 peak in real prices until 2031.

According to Shiller, people seem to be buying homes now because they think it is a good time to buy, with the economy gradually pulling out of a recession. They aren't buying because of expectations of a boom in housing, which is typical of bubble behavior.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DIA $182.26 -0.29%
IYR $76.01 0.03%
QQQ $110.47 -0.10%
SPY $212.99 -0.24%
XHB $36.20 -0.55%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs