23rd October 2013

Man Predicting Housing Bubble Awarded Nobel Prize, expressed concerns about the potential for a new housing bubble.

posted in Appraiser News |

Man Predicting Housing Bubble Awarded Nobel Prize – Repost from Appraiser News Online

Yale University professor Robert Shiller, along with University of Chicago professors Eugene Fama and Lars Peter Hansen, was awarded the Nobel Prize for economics on Oct. 14; Shiller for developing new methods of studying asset market trends with a focus on housing, HousingWire reported.

The Standard & Poor’s Case-Shiller Home Price Indices have become the benchmark by which U.S. single-family home price trajectory is measured.

Anthony Sanders, professor of finance in the school of management at George Mason University told HousingWire, “Robert Shiller’s contributions are really about irrational expectations and prices (better known as bubbles). Economists have been developing hedonic models for decades, but Case and Shiller was the first widely watched house price index other than GSE indices.”

“He is certainly someone who has done work in finance and real estate finance that merits a Nobel prize,” Mark Calabria, director of financial regulation studies at the public policy think tank Cato Institute, told HousingWire. Calabria added that Shiller’s work is data-driven and created significant market interest because the S&P Case Shiller Home Price Index is considered to be one of the most practical.

Calabria credits Shiller for being among the first to identify bubbles in the housing market and the dot-com sector.

“I don’t think he is always saying the sky is falling down,” Calabria told HousingWire, but he noted that Shiller is willing to report the asset inflation trends.

“This will give a little more weight to his willingness to call what he sees as bubbles in the marketplace,” Calabria told HousingWire.

In fact, Shiller recently has expressed concerns about the potential for a new housing bubble.

However, housing experts speaking at the Information Management Network’s ABS East institutional investor conference in Miami Oct. 7 disagreed with Shiller’s assertion, which they said may be based on the entry of investors who could have over-stimulated local markets. Mark Fleming, chief economist at analytics firm CoreLogic, told the conference that price appreciation is slowing down and only now is correcting itself for an overshoot in price collapse, HousingWire reported.

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