Many analysts have shared the working assumption that prices have to come down from the record-setting levels seen across the country this year. But in a new interview with Yahoo Finance Live, Yale Professor of Economics Robert J. Shiller said deep drops may be on the horizon.
“There is a chance that we will see big declines in coming years,” Shiller said on Yahoo Finance Live. “I think people are anxious about that at this point in history.”
Noting both the historically low mortgage rates and pandemic-induced FOMO that have boosted the market over the last 16+ months, Shiller explained that the drivers have created an unstable situation.
“It is partly due to low interest rates, of course, and Fed policy,” Shiller said. “But it’s so pervasive…I think it has something do with our psychology at this point in history, maybe emerging from a COVID-19 pandemic.”
Earlier this summer, the Nobel Prize winning economist began sounding warning alarms, while noting that there’s unlikely to be a market that collapses overnight.
“It’s less short run volatile than the stock market,” Shiller told Yahoo Finance in May. “But you can see that we’re seeing price increases now that haven’t quite been realized since those years just before the financial crisis.”
According to recent numbers from the S&P CoreLogic Case-Shiller national home price index, housing values jumped 19.7 percent year over year, in July 2021, up from 18.7 percent in June. That marked the fourth consecutive month of record-setting growth.