Robert Shiller on Why Home Prices Could Fall for Several Decades

geneer

http://www.fool.com/investing/general/2011/12/23/robert-shiller-on-why-home-prices-could-fall-for-s.aspx

No one knows what will happen, but it's not hard to argue that the housing market is nearing a bottom. Home construction is as unsustainably low today as it was unsustainably high during the bubble. The more builders like KB Homes (NYSE: KBH ) and Lennar (NYSE: LEN ) are beaten into submission today, the bigger the housing rebound will eventually become.
That's the good news. But here's a question few are asking: After the housing market does bottom, what you should expect from it going forward?
I asked Yale economist Robert Shiller -- of S&P/Case-Shiller housing index fame -- that question in an exclusive interview earlier this month. His answer might shock you: Not only do home prices, on average, not produce real returns over time, but history shows they could actually decline over the long haul.

wotsthat

Oh No! Robert Shiller says house prices could fall in the US! It's almost as scary as when Jonanthan Davis says house prices will fall.

Sibley

You won't believe how much better this board is when you have Geneer on ignore. Try it.

brit1234

A lot of British property investors were buying last year in the US thinking the market there had bottomed out. Many were offered properties from distressed American investors who were in deep trouble. I personally know cases in Florida and Vegas where the old bys networks are trying to flog their portfolios to there friends. Yet prices are still falling.

Just to think the UK had about 15% higher bubble prices than the US markets bubble, so we have a long way to fall in the UK yet. Either that or buy a Vegas penthouse as a starter home.

Road_Hog

The difference with the US market is that they have vast swathes of land that they can build on, we don't have that here. For example, in Detroit, there are huge areas of brownfield sites, where empty building and properties stand that have been abandoned.

Yet still, new properties and buildings are being built on greenfield sites, because it's cheaper and they don't have to knock down and clear the old building.

Sibley

The difference with the US market is that they have vast swathes of land that they can build on, we don't have that here. For example, in Detroit, there are huge areas of brownfield sites, where empty building and properties stand that have been abandoned.

Yet still, new properties and buildings are being built on greenfield sites, because it's cheaper and they don't have to knock down and clear the old building.

Brit has really been put to the sword with that. :rotfl:

crash123

Road_Hog wrote: »

The difference with the US market is that they have vast swathes of land that they can build on, we don't have that here. For example, in Detroit, there are huge areas of brownfield sites, where empty building and properties stand that have been abandoned.

Yet still, new properties and buildings are being built on greenfield sites, because it's cheaper and they don't have to knock down and clear the old building.

How much of Britain do you think is built on?
Answer not very much

Cleaver

brit1234 wrote: »

Just to think the UK had about 15% higher bubble prices than the US markets bubble, so we have a long way to fall in the UK yet.

Do you not see the fundemantal flaw in this reasoning? The US and UK housing markets are seperate and are effected by a multitude of different factors. Therefore one doesn't necessarily follow the other, it's as flawed as assuming that Shell's share price will rise 25% just because BP's has.

StevieJ

crash123 wrote: »

How much of Britain do you think is built on?
Answer not very much

I suppose the question should be How much of Britain is ALLOWED to be built on? Answer not very much

geneer

wotsthat wrote: »

Oh No! Robert Shiller says house prices could fall in the US! It's almost as scary as when Jonanthan Davis says house prices will fall.

Oh I forgot. It couldn't happen here (C)2007. :rotfl:

brit1234

Cleaver wrote: »

Do you not see the fundemantal flaw in this reasoning? The US and UK housing markets are seperate and are effected by a multitude of different factors. Therefore one doesn't necessarily follow the other, it's as flawed as assuming that Shell's share price will rise 25% just because BP's has.

Are you forgetting the principle reason in the US and the UK for rapidly rising prices was mass irresponsible lending and fraud.

House prices here are limited to what the lending criteria is. There is demand and effective demand.