Robert Shiller Comments

Is the real estate rally coming to an end?  The co-creator of a popular housing price index certainly thinks so.  Robert Shiller of the Case-Shiller Index recently stated that he expects the streak of more-than-10-year increase in homes prices will be coming to an end.  Now, his own index shows prices lower now than a year ago so I’m not sure why he doesn’t say it ended last year.  More perplexing to me is his reasoning.  He says that because mortgage rates will soon be coming down off their highs, the market will cool and prices will come down.  That really seems at odds with simple supply and demand.  When mortgage rates come down, most economists expect demand and prices will increase.  I may be biased because I’ve rarely agreed with this guy over the years, but it just seems like an odd claim to make. Obviously, prices can come down for a variety of reasons and the Austin market has certainly come down over the past year, but saying prices will drop because interest rates drop seems strange to me.

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