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Robert Shiller Has A Chiller For Housing Recovery Hopes

Tyler Durden's picture




 

Recent research by Robert Shiller indicates sounding the all-clear for a housing recovery is premature since the home-price rebound, if that's what it is, doesn't yet have momentum - which is the most powerful driver of home prices. As he notes in today's WSJ, momentum is a modestly weak force in the stock market but the most important driver of the 'feedback loop' in home-price increases (followed by unemployment). "It could be a bottom, I just don't know", he adds pointing to the large overhang of homes that are either in foreclosure of near it - which would push prices down further if they were ever released to the market (wanting to see momentum carry into the Spring to be convinced). Critically, he sees bubbles once again forming in some areas, commenting that investors have been "primed to think speculatively" adding that "There was a change in our mindset. Now we start thinking about the housing market as like the stock market." Our question is, if the increasingly speculative housing market is part of the CPI basket, why then is the stock market not also part of what is now an inflationary basket chock full of QE-sensitive assets.

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Tue, 08/07/2012 - 09:06 | 2684236 Watauga
Watauga's picture

What did so many posters on ZH used to say?  Oh, right: "Gold bitchez!"

Tue, 08/07/2012 - 09:13 | 2684255 GetZeeGold
GetZeeGold's picture

 

 

I think I saw that on a Westboro Baptist protest sign. I thought to myself....those people are clearly crazy.

 

Tue, 08/07/2012 - 09:42 | 2684331 Eireann go Brach
Eireann go Brach's picture

Shiller you Shill! At the beginning of this year you called for another 20% reduction in prices! This is an artificial bottom driven by manipulated interest rates! If rates rise by just 1%, buyers lose 10% in purchasing power, just imagine if rates rise by 2%! Then prices need to plummet again to be affordable and in line with rates! So once again we have the Fed ruining housing!

You sold out and joined team Obimaboma's election economic recovery propaganda campaign! Fuck you

Sincerely

Your students and mom

Tue, 08/07/2012 - 15:29 | 2685567 mkkby
mkkby's picture

Correct.  Housing (and stocks) depend on zero interest rates FOREVER.  If they ever normalize, it's plunge time.

Tue, 08/07/2012 - 09:19 | 2684263 MillionDollarBonus_
MillionDollarBonus_'s picture

If the housing recovery does not pick up, then we simply have to introduce a HARP2. This will consist of a modified version of the original program. The two main modifications will be as follows:

1. Loans will have negative interest rates, making them more attractive to home buyers 

2. The loans will be conditional on paying an additional premium on the value of the house, putting upward pressure on house prices

I fully realize that HARP2 will not be popular with libertarians, right-wingers and lunatic conspiracy theorists, but then again, these people were even against the emergency financing of AIG in 2008, so they don't have much credibility in my opinion.  

Tue, 08/07/2012 - 09:24 | 2684282 CharlieSDT
CharlieSDT's picture

Good one today.

Tue, 08/07/2012 - 09:24 | 2684283 azzhatter
azzhatter's picture

Great report Barney....er....I mean....MDB

Tue, 08/07/2012 - 09:33 | 2684305 GetZeeGold
GetZeeGold's picture

 

 

It's a dead tie between upticks and junks......the suspense is killing me.

 

I can't look.

 

Tue, 08/07/2012 - 14:22 | 2685317 Bananamerican
Bananamerican's picture

so many red down-ticking dullards on MDB's posts....sad

(gotta be right-wingers....ALL of 'em. RW's don't get "nuance" or subtelty very often.... They get confused by satire and consider it to be a sign of "LIBERALLLL intellectuality". 

 

Lefties, at their worst, are rules-fascists....picture a bitchy, medicinal, lesbian scold.

Righties, at their worst, are like dogs, woofing at the wind....

Tue, 08/07/2012 - 09:26 | 2684288 duo
duo's picture

HARP was a shadow program to speed foreclosures, disguised as trying to "help" homeowners.  A kind of legalized theft.

Tue, 08/07/2012 - 09:33 | 2684290 _ConanTheLibert...
_ConanTheLibertarian_'s picture

how did HARP1 work out? Will you post this message again and again during HARP n

If AIG was left to fail we actually would have a recovery by now you little evil motherfucking scumbag


Tue, 08/07/2012 - 09:58 | 2684377 Bansters-in-my-...
Bansters-in-my- feces's picture

Not a lot to say other than ,fuck off you piece of shit MDB.

I see your green button pushers are on payroll this morning.

Fuck off and die.

Tue, 08/07/2012 - 10:57 | 2684646 Overfed
Overfed's picture

Someone doesn't understand sarcasm. In all fairness, his deadpan delivery does tend to throw people off.

Tue, 08/07/2012 - 14:05 | 2685275 Fukushima Sam
Fukushima Sam's picture

I would call MDB satire rather than sarcasm.  They are closely related, but satire is art.  And MDB is indeed an excellent satirist.

Tue, 08/07/2012 - 10:24 | 2684498 JawsMusic
JawsMusic's picture

Its rare that one finds such a pitch perfect Troll. One has to admire the skill involved, kudos to the writer behind MDB.

Tue, 08/07/2012 - 10:36 | 2684554 GoingLoonie
GoingLoonie's picture

I will assume this post was made in jest.

Tue, 08/07/2012 - 14:30 | 2685342 Bananamerican
Bananamerican's picture

wow. you might need a nap after that intellectual leap

Tue, 08/07/2012 - 13:45 | 2685214 savagegoose
savagegoose's picture

whats that, you buy house for $1mill, and they make monthly mortgage payments to you for the next 20 years, in thanks for buying?

Tue, 08/07/2012 - 14:16 | 2685303 silverserfer
silverserfer's picture

if you downvote mdb, you are not competent enought to be on this site and should be demoted to Yahoo finance for 1 year.

Tue, 08/07/2012 - 09:08 | 2684240 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Oh, there will be momentum again. To the downside that is.

Nice picture BTW

Tue, 08/07/2012 - 09:08 | 2684242 Cognitive Dissonance
Cognitive Dissonance's picture

"It could be a bottom, I just don't know", he adds pointing to the large overhang of homes that are either in foreclosure of near it."

I suspect the "overhang" of homes is at least three times larger than the current "supply" and growing. Plus when and if the market stabilizes, that alone will bring an entirely new wave of homes onto the market as people who waited for prices to firm now pop to the surface.

The housing market under these conditions is buried for the next decade.

Tue, 08/07/2012 - 09:09 | 2684244 rguptatx
rguptatx's picture

CPI is ex-food, housing, energy, transportation and taxes - meaning iPads and mobile data plans are the only contributor t oCPI.

Tue, 08/07/2012 - 09:22 | 2684275 scatterbrains
scatterbrains's picture

I think the CPI is too sensitive to inflation.  The bernank needs to add a gauge of "happyness" as an offset.  If gas is $6 bucks but your standing inline with a basket of snacks and cigs with your ebt card in hand are you happy ? Why shouldnt that be part of the equation ?

Tue, 08/07/2012 - 22:45 | 2686576 jerry_theking_lawler
jerry_theking_lawler's picture

on top of that, lets add unicorn farts and rainbow skittles into the cpi calc......there seems to be alot of that going around......

Tue, 08/07/2012 - 11:31 | 2684805 Lord Blankcheck
Lord Blankcheck's picture

I though they change housing prices in the CPI to housing rents in the early 1980's.Most rentals are under rent control thus keeping the CPI lower.What would the CPI have been from  2002-2006 in housing prices were used?

Tue, 08/07/2012 - 09:09 | 2684246 Christoph830
Christoph830's picture

From the WSJ article:  "Momentum is the tendency for prices to keep moving in the same direction. It exists, but is a relatively weak force, in the stock market. "

Is this a joke?

Tue, 08/07/2012 - 09:29 | 2684298 odatruf
odatruf's picture

It sure is.  The study of psychology is a better endeavor for understanding today's markets than the study of economics and business.

 

Tue, 08/07/2012 - 09:09 | 2684248 Lohn Jocke
Lohn Jocke's picture

We kids don't need to saddle ourselves with debt. We have college for that.

Tue, 08/07/2012 - 09:20 | 2684270 kridkrid
kridkrid's picture

Why not do both... it's the American Dream, don't you know.  Just think of how insidious that is.  Two ideas that become ideals are little more than the cornerstones to debt servitude.  Remarkable.

Tue, 08/07/2012 - 09:12 | 2684251 Sean7k
Sean7k's picture

A house is like any asset, it depreciates over time relative to it's condition and care. The only reason housing goes up is either: improvenemnts or dollar inflation. Dollar inflation is not value.

The fact housing continues to stay in a small channel reflects one, the huge hidden inventory that continues to add to the market inventory and the rapid dollar inflation being used to offset deflation. 

Anyone betting on the housing market in light of falling production rates and high inemployment is playing with real fire.

Tue, 08/07/2012 - 09:18 | 2684265 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

Welp, there is also population migration and growth to take into account.  More people chasing the same amount of land would cause the price of that land to rise.  Also, in theory, overall salary gains in excess of inflation would lead to price rises as average salary increases while the recommended ratio (say 2.5-3x annual salary) remains the same.

Tue, 08/07/2012 - 09:24 | 2684281 Sean7k
Sean7k's picture

Then you can explain why those factors have not made a bit of difference. There have been no gains in average salaries since the seventies, so that theory is just that. 

When you talk in terms of the general market, you don't use specific demographics to argue against a point. Welp? What a moron.

Tue, 08/07/2012 - 09:37 | 2684319 crawldaddy
crawldaddy's picture

even worse than that. Median take home pay has been FALLING inthe US for a decade. I agree with your points, only bankers and their games are keeping the housing market propped up right now.  It needs to drop another 30% IMHO.

Tue, 08/07/2012 - 09:29 | 2684302 kridkrid
kridkrid's picture

Your first part is fine (more people chasing the same amount of land)... though I don't think land is as finite of a resource as the position would suggest.  Of course in the broad sense, land is absolutely a finite resource, but relative to a quarter acre lot within a 400 home community outside any city, minus LA and NY, I think there is room to build.

But your second part about salaries certainly fit into sean's position about the increase in price being little more than inflation... the same is true of salaries.  I'm sure you've seen the graphs, but for a VAST majority of Americans, real income has been completely flat for 40 years.  Not our paychecks, but our purchasing power.  The increase in your paycheck is window dressing... as is the increase in housing prices (minus the bubble, but a lot of that has been eliminated, though not all).


Wed, 08/08/2012 - 21:43 | 2689681 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

That's why the 'in theory' qualifier is bolded.

 

To be fair, inflation adjusted, I'm currently netting as much as I ever have in the 25+ years I've been filing tax returns, and looking to buy property at 2.5x my annual, so's I can improve it with things that don't make sense doing to a rental.

Tue, 08/07/2012 - 09:28 | 2684292 azzhatter
azzhatter's picture

Some guy bought 650 houses in Macomb Mi yesterday for $4.8m.,an average of $7,400 per house.

Tue, 08/07/2012 - 09:36 | 2684317 kridkrid
kridkrid's picture

Interesting... here's the link..

http://www.nydailynews.com/news/money/millionaire-scoops-650-homes-michigan-county-foreclosure-auction-article-1.1129929

In a way, this just goes to show you that you never really own property.  The government owns it in the form of taxation.  Can't pay your property tax, we will find someone who will.  And while this looks like a good deal for the yacht owner, it will be interesting to see how it all plays out.

Tue, 08/07/2012 - 09:39 | 2684326 crawldaddy
crawldaddy's picture

its a terrible deal for him unless he is getting some bullshit sweatheart deal from the govt.  YOU COULDNT give those properties away because fo the taxes, upkeep, and all the other cost associated with them.  But then again, there may be the ol insider bullshit game going on here where we the tax payers are somehow going to get stuck with these worthless shacks while he turns and burns.

Tue, 08/07/2012 - 09:59 | 2684383 CheapBastard
CheapBastard's picture
The woes of being a small-time landlord April Rental Advice: Think renting out that second home is the quick-buck solution to a sagging real-estate market? Think again. In landlording, money isn't fast, and the only sure thing is headaches.

 

Mark Kreditor has been managing rental properties for 31 years and has this to say to anyone considering getting into the landlord game: Don't do it.

Monthly costs inevitably creep in. Taxes and association dues only go up. And, in the end, properties aren't even guaranteed to appreciate.

"It's going to be a hardship on your checkbook every month, and every couple years there's going to be a tenant that does something really awful, and you're going to hate it, hate it, hate it," says Kreditor

 

http://realestate.msn.com/april-2012-rental-advice-the-woes-of-being-a-s...

 

I identify with him. Once owned a rental and got swiped $14,000 repair bills and 7 months no rent and it was a b*tch evicting the guy. Court cases are so backlogged now it takes months to throw a non-paying tenant out. Good luck to anyone who wants to try being a landlor din thsi volatile climate.

Tue, 08/07/2012 - 09:37 | 2684322 Honey Badger
Honey Badger's picture

Over time, your house depeciates and the land under it appreciates.

Tue, 08/07/2012 - 09:57 | 2684372 paulypaul
paulypaul's picture

Another reason for housing going up, other than the two you mention, is the attraction of capital to that asset class.

Not general inflation but a greater percentage of liquidity being applied to an asset class.

Tue, 08/07/2012 - 09:12 | 2684252 LoneStarHog
LoneStarHog's picture

Any F__kTard who "invests" in a spec house, today, and expects to be financially rescued when it crashes and burns should be culled from whatever is left of so-called intelligent society.

Tue, 08/07/2012 - 09:14 | 2684257 MIDTOWN
MIDTOWN's picture

DUH...

Weak Job numbers

Damaged credit scores

Damaged Financial Statements

Banks not lending

40% of realtors have quit the business and another 40% are too broke to advertise. - No Momentum

Jobloss / Foreclosure / Jobloss / Foreclosure / Jobloss / Foreclosure ...

Tue, 08/07/2012 - 09:19 | 2684269 You Didn't Buil...
You Didn't Build That's picture

"Waiting for Momo," I hear is the new absurdist play by Samuel Beckett...waiting endlessly and in vain for the arrival of someone (or something) named Momo.

Tue, 08/07/2012 - 09:21 | 2684271 peekcrackers
peekcrackers's picture

The constipated houing market is going to move by slipping a ivestment  stimulant laxative..

Its backed way up in the  bowels of the showdow banking

 

Tue, 08/07/2012 - 09:21 | 2684273 Hype Alert
Hype Alert's picture

Our question is, if the increasingly speculative housing market is part of the CPI basket, why then is the stock market not also part of what is now an inflationary basket chock full of QE-sensitive assets.

 

Exactly, stock price should represent replacement cost of the company.  Inflation from money printing is evident, but the FED will make sure to look the other way just like they did when housing was doubling in price.

Tue, 08/07/2012 - 09:39 | 2684311 khakuda
khakuda's picture

Exactly, they already are looking the other way.  Rosengren is on the tape this morning saying there is no inflation and arguing for endless, open ended QE.  Looks like he's the first one sliding down the slippery slope.

Someone should ask him if there is no inflation, why do they keep changing bogeys?  They used CPI until it showed food and energy inflation, so they moved to core CPI to mask inflation.  Recently, that didn't work and surprise, surprise, they've changed to the PCE.

This crap is EXACTLY the reason Jefferson and the Founders didn't want the government to be able to coin money.  They end up taking control of everything and freedom and liberty disappear.

Tue, 08/07/2012 - 09:48 | 2684346 Sean7k
Sean7k's picture

Just  a helpful reminder. Jefferson was at odds with most of the founders as they were federalists. Also, the FED is a private banking corporation that uses the appearance of ties to the government to maintain credibility. 

Tue, 08/07/2012 - 09:22 | 2684276 youngman
youngman's picture

Some guy just bought 350 homes in Michigan..Detroit I think....some he will sell...or try too...others he said he was going to give to chairity....now what they will do with them is a guess....time will tell if this was a good deal or not...

Tue, 08/07/2012 - 09:28 | 2684293 azzhatter
azzhatter's picture

It was 650 houses and he paid an average of $7,384 per house

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