The latest figures from the widely watched Standard & Poor's/Case-Shiller Home Price Index show that housing prices fell 3.8 percent on a year-over-year basis.
"There's a lot of downward momentum," Yale economist Robert Shiller, one of the creators of the index, told an interviewer for The Daily Ticker.
Some of the figures indicate that conditions remain flat, while others show a contining decline. The Daily Ticker reported in print that according to the index, "home values fell for the fifth-straight month, and prices dropped to their lowest levels since 2003." In the TV interview, however, Shiller noted that "on a seasonally adjusted basis, it's just flat."
In any event, the statistics are hardly encouraging to those who are hoping for a recovery in housing prices and construction. "The big thing is that we haven't resolved Fannie and Freddie," Shiller said, referring to the problems of the mortage lenders Fannie Mae and Freddie Mac. That's a political issue, and market is increasingly affected by political decisions, he said. "I think people sense that, and I think they're holding back."
"There's a real chance we're in a sort of Japan-like slump that will go on for years and years," Shiller said. He observed that roughly a century ago, economists expected the prices of existing houses to fall over time as newer and better dwellings came on the market. He said it's possible that new, better-constructed housing will exert a downward pressure on the values of existing units. "I'm worried," he said, "that home prices have now been declining for about five years."
Referring to Richard Florida's book The Great Reset, Shiller said it's also possible that the troubles of the past five years are bringing about a change in people's attitudes. There may be a shift toward renting rather than owning housing as well as a trend toward urban rather than suburban living, he speculated. Shiller says the shift toward renting and city living could mean "that we will never in our lifetime see a rebound in these prices in the suburbs."
Shiller's comments also echoed some of the themes of a blog post in April 2011 by Robert Steuteville on "the coming housing calamity." That post was based largely on the findings of Arthur C. Nelson at the University of Utah. According to Nelson, the housing industry faces demographic and economic forces that will apply unrelenting downward pressure on themarket for the next decade.
Shiller cautioned that big trends have a large psychological element, making them hard to predict. The Case-Shiller index tracks housing prices in 20 metropolitan areas.
Another source, Real Estate Economy Watch, forecast that in two to three months, the Case-Shiller index will be showing a rise in prices. That source said figures in the WMM Auction Index, a monthly measure of prices from auctions in 20 metro markets by the auction house Williams, Williams & McKissick, shows an upward movement. The WWM index is said to regularly foretells the direction of the Case-Shiller index.
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