Shiller Says Recovery May Be A Long Road

A New York Times op-ed from Robert Schiller reminds us all of the history of house price decreases.

He warns that the downward pressure on prices could continue for years.

Imagine a young couple now renting an apartment. A few years ago, they were toying with the idea of buying a house, but seeing unemployment all around them and the turmoil in the housing market, they have changed their thinking: they have decided to remain renters. They may not revisit that decision for some years. It is settled in their minds for now.

On the other hand, an elderly couple who during the boom were holding out against selling their home and moving to a continuing-care retirement community have decided that it’s finally the time to do so. It may take them a year or two to sort through a lifetime of belongings and prepare for the move, but they may never revisit their decision again.

As a result, we will have a seller and no buyer, and there will be that much less demand relative to supply — and one more reason that prices may continue to fall, or stagnate, in 2010 or 2011.

He cites history as a perfect example of his thesis:

Even if there is a quick end to the recession, the housing market’s poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997.

Robert Shiller is chief economist for MacroMarkets LLC and is also a Yale professor of finance and economics.

Travis J. Bohling
Brewer Caldwell Property Management
480-212-7041 (Direct Line)
480-212-7042 (Fax)
Travisb@brewercaldwell.com