Bob Shiller Warns "It's Different Now, We Can't Trust Momentum"
"I just don't see evidence that people believe we are launching into a great new era" of home price appreciation,"that's what we had in the early 2000s." Simply put, he chides Faber and Cramer, "people are not so excited about the future," in spite of record high stock prices (and surging home prices) as it seems the Fed's plan was foiled again. In a fascinating to-and-fro, they note "we don't want to go back to 2005," even though "it would lift the economy" since "we know how that story ends." The hedge funds and 'investors' proclaim themselves long-term investors, but Shiller notes "they are not, what they have learned there is short-run momentum in the housing market," and will bail at the first sign of that ebbing, "it's different now, we can't trust momentum."
Some uncomfortable truths from the Nobel winner...
"Real homebuyers are not as excited about the housing market as the price increases seem to suggest..."
"It's more of an 'unusual' demand from investors that's driving the market now..."
"...the market is driven more by psychology than affordability"
The rental market demand 'excuse' for growth and long-term gains is obsequious as Shiller asks rhetorically, "how can these guys not notice how fast prices have been going up and historically momentum is a much better play in housing than it has been in the stock market." He adds, "I'm pretty sure [an exit] is on their minds," but as he warns, "they are not going to say this, of course."
"It looks like we are a little bubbly in the stock market,... if it keeps going up like this, the expected retrun on the stock market will fall below the TIPS yield."
Former Fed official Kevin Warsh didn't help:
"Housing and housing assets are going to give you one signal," Warsh said in a "Squawk Box" interview. "[But] there is a broader cross section of data from the consumer, from the business, from trade and from exports. So this preoccupation with housing strikes me as really quite dangerous."
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