Robert Shiller, the Nobel laureate and founder of the Case-Shiller Home Price Index, is getting worried by what he sees:
Robert Shiller, who won the esteemed award with two other Americans for research into market prices and asset bubbles, pinpointed the U.S. stock market and Brazilian property market as areas of concern.
“I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets,” Shiller told Sunday’s Der Spiegel magazine. “That could end badly,” he said.
“I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable,” he said, describing the financial and technology sectors as overvalued.
Remember: He was one of the few to predict last decade’s housing bubble.
Here’s more evidence that Wall Street investors are playing a huge role in the housing recovery by snapping up tens of thousands of homes that might otherwise be sitting vacant due to their beat-up conditions.
There are a couple of seemingly contradictory thoughts here:
One, the same Wall Street that created the historic subprime-mortgage fiasco is now riding to the Lone Ranger rescue.
Two, the same Wall Street that created the historic subprime-mortgage fiasco is now doubling down on last decade’s fiasco and acting more like a drunken cowboy at a saloon.
Btw: Disney is making a new Lone Ranger movie, due out next month. The Lone Ranger and Tonto sure look different.
Maybe the foreclosure rate in Massachusetts has fallen.
But here’s a list of the top 14 cities across the US that are still overwhelmed by foreclosures. They’re not quite where you’d expect them to be, like California and Arizona, etc.
Yeah, sure, there are seven cities listed as being in Florida. No surprise there. But the next highest state, with three cities buried under foreclosures, is Ohio, followed by Illinois (two cities), and Nevada and Washington (one city each).
Maybe Ohio and Illinois aren’t that surprising. They’re classic old rust-belt states.
Remember how many people kept predicting that we had “hit the bottom” during the recent housing market collapse — only to see the market hit a new low a month later? The bogus predictions literally went on for years, even becoming a running joke.
Of course, some of the forecasters were eventually proved right, like a stopped clock being right twice a day, as the market seemed to have finally hit bottom some time last year.
But now some forecasters are seeing — yes! — a “housing bubble” in current stats.
You read it here first: The first official sighting of a “housing bubble” warning, sort of like a bird watcher spotting a rare yellow bellied eremomela high up on a mountain peak. It’s so exciting!
File under: Yellow bellied eremomelas
Update: Housing prices rose last month across the US. So it’s true! It’s a housing bubble!
Update II: It’s a Tulip Bubble!
As home-sale prices rise, so does the net equity holdings of homeowners — and, boy, has it grown in recent months.
Since 2011, the net home equity holdings of Americans rose by $1.7 trillion. But $500 billion of that growth occurred in just the past three months alone.
To give you an idea how important that is to the economy, let’s say that various homeowners borrow 10 percent against that last $500 billion over the course of the next year. That’s $50 billion pumping through the economy — and much of it through the home-remodeling industry in particular — that wasn’t there before. In turn, that means more architects, designers, contractors, carpenters, electricians etc. working.
The Globe recently did a big story on how the remodeling industry is recovering fast in Greater Boston. Not all of it is driven by borrowing. Still, a healthy housing market, not surprisingly, leads to more confident homeowners willing to re-invest in homes.
Bank of America and other large institutions are now predicting a steady rise in US home prices, as the housing market and economy finally seem to be getting over last decade’s mortgage and financial fiascos.
But Scott is a little nervous about all the rhetoric, sensing a classic déjà vu moment all over again, as Yogi Berra might put it.
Though it’s nice to celebrate “turning the corner” in the housing market (as we cheerfully did yesterday), we’re not about to go as far as the mayor and declare a “full recovery” for the entire economy here.
Unemployment is still high, the housing market is still shaky, and there are a host of other lingering problems from the recent recession.
Still, we catch the mayor’s general drift. Check out the accompanying chart (click here to see it more clearly) about state credit ratings.
Massachusetts took a while to recover from the dot-com bust early last decade. But notice how it got bumped up last year to the second-highest type of credit rating, reflecting the state’s stronger and more diversified economy.
As for Illinois, well, it is Blago Land.
Here’s a primer on how a recovering housing market helps the overall economy, as opposed to how a crashing housing market hurts the overall economy.
File under: More please
The number of individuals filing for personal bankruptcies in Massachusetts fell by more than 18 percent last year, to about 11,964, the Warren Group reports.
In other words: It’s more good news about the economy.
Perhaps it might be described as better news, considering where we were coming from in terms of the economy.
This post may not have much to do with housing, but this is a pretty impressive chart tracking inflation since the American Revolution.
Well, maybe housing is involved, considering how much home prices have risen over the decades and helped drive up overall costs for most Americans.
Btw: The chart, via and as presented by ZeroHedge, is supposed to be a damning indictment of the Federal Reserve system (the vertical red line is when the Fed was created in the early 1900s). We’re not in the position to argue for or against that point. We just think it’s a cool, if slightly depressing, chart.