“‘Home prices are very, very high by historical standards’”
That was Yale economist Robert Shiller talking about the current state of the housing market during a March interview on on CNBC Overtime.
Shiller, a researcher at the National Bureau of Economic Research, helped create the Case-Shiller Home Price Indices, which are leading trackers of the U.S. real-estate market.
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“It’s easy to forecast the short-run in the housing market. If you’re a long-term buyer it’s not clear,” Shiller said. “Home prices are very, very high by historical standards.”
“It might get a little cheaper after another six months,” he continued.
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Home buyers are having difficulties for many reasons: low inventory, historically high prices and high mortgage rates. In fact, the New York Fed housing survey shows Americans expect mortgage rates to rise above 8% a year from now.
Over the past year, the Federal Reserve has consistently raised interest rates as inflation continues to hit the U.S., and in March raised rates again by a quarter of a percentage point to 4.75%-5%, a 16-year high. The Fed also indicated that another rate hike is on the horizon.
While home prices are high by historical standards, they are on the decline in recent months. Shiller’s index shows home prices fell for seven consecutive months between July 2022 to January 2023.
Cities in the west such as San Francisco and Seattle had the lowest year-over-year home price increases, and Miami, Tampa and Atlanta reported the highest gains.
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One recent survey shows that many Americans expect mortgage rates to rise above 8% a year from now.
“We will get inflation down in time,” Fed Chairman Jerome Powell said. “No one should doubt that.”
Shiller also said that Americans may have to accept that there could be a looming economic downturn.
“We have smart people on the Fed, and the Treasury Secretary I admire — Janet Yellen,” Shiller said. “They may have to accept something of a recession.”
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