**Is the U.S. Housing Market Headed for a Slowdown? Robert Shiller Weighs In**
Yale University economist Robert Shiller, known for his accurate predictions on the stock market and housing market crashes in the past, is now closely monitoring the U.S. housing market. After a period of exuberance during the COVID-19 pandemic, which saw a significant increase in home prices, Shiller believes that the market may be approaching a turning point. In an interview with CNBC, he suggests that national house prices could plateau as interest rates begin to rise. Let’s take a closer look at Shiller’s insights and what they could mean for the future of the U.S. housing market.
**The Housing Market and Its Predictability**
Unlike the stock market, the housing market is typically more predictable. Shiller notes that the U.S. housing market has experienced steady growth in home prices since 2012, spanning a period of about ten years. However, he speculates that this trend may be coming to an end due to the current rising interest rates. This expectation is grounded in the fact that many homebuyers rushed to secure low mortgage rates of 2% or 3% during the pandemic, which they knew would not last indefinitely.
**The Influence of Interest Rate Increases**
Shiller believes that the fear of interest rate increases has had a significant impact on the housing market. Both homeowners and new buyers sought to take advantage of historically low rates, driving up demand and prices. However, Shiller suggests that this positive influence on the market is now waning, as rising interest rates come into play. He asserts that the era of ultra-low mortgage rates is coming to an end, potentially affecting the demand for housing.
**The Potential for a Decline in House Prices**
Last summer, Shiller also hinted at the possibility of declining house prices replacing the pandemic-induced housing boom. He referred to futures market data from the Chicago Mercantile Exchange, indicating that home prices were expected to fall by approximately 10% by 2024 or 2025. While there was a 5.1% decrease in national house prices, as measured by the Case-Shiller National Home Price Index, between June 2022 and January 2023, there has been a rebound of 2.8% through April.
**The Seasonal Nature of House Price Gains**
Addressing the recent gains in national house prices, Shiller suggests that these increases may be driven by seasonal factors. He notes that house prices tend to rise during the summer months. If this is the case, it could mean that as the housing market enters the seasonally slower fall/winter months, month-over-month price declines may return. Shiller remains cautious about the future but maintains that he is not panicking either way.
In summary, renowned economist Robert Shiller is closely monitoring the U.S. housing market, raising concerns about the potential end of the steady growth in home prices. With rising interest rates and the possible return of seasonal price declines, the future of the U.S. housing market remains uncertain. Shiller’s past accurate predictions on market downturns add weight to his analysis, making it crucial to pay attention to his insights.