Through The Fly's Eyes: Robert Shiller
from Theflyonthewall.com
Will Shiller Be a Good Contrarian Indicator?
Yesterday, Robert Shiller of Macromavens said "the pullback in the US residential real estate market is showing no signs of slowing down." This followed the S&P/Case-Shiller national home price index falling 0.9% sequentially in the second quarter.
The index is down 3.2% from the second quarter of last year and is at its lowest level since it began in 1987. Robert Shiller went on to say he is worried about your home's value, and that's not good.
As a reminder, Shiller, of Yale professorial claim, correctly called the excesses of the late 1990's stock market. However, while he called the top, he never called the bottom, staying with his bearish bias way too long and never becoming a buyer.
Shiller shifted his focus to real estate in the current decade. Once again, his bearish prognostications proved correct. However, as the real estate market becomes weaker and weaker with the media flocking to his doors, the trained economist appears to be focused on following the downward trend and not attempting to find a point to start bottom fishing.
A new contrarian indicator may be when Shiller hits the airwaves in full force with his bearish views, it could prove to be a good sign that the bottom for the bear market in real estate is near.
posted by Eric at
9:28 AM
1 Comments:
You're a few years too early in trying to call a bottom and reversal. With real estate having doubled or tripled in southern California since '99, we should realistically see all those gains above the nominal historic 5% per anum appreciation completely reversed. That will be the 'half off' sale at which the nominal median price-to-income ratio drops below 5:1 in socal (with the rest of the US historically being 3 or 3.5:1). Borrowers will be required to have some skin in the game, and lenders will need assurance that the borrower can make both interest and principal payments on a standard 30-yr note. There is a multi-year overhang of excess inventory in socal, when all is said and done. Bottom soon? You have got to be kidding!
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Anonymous, at 11:15 AM
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