Shiller Feeds

FOMO Helped Drive Up Housing Prices in the Pandemic. What Can We Expect Next?

2022-10-01T08:52:00.008-07:00

Existing home prices in the United States soared 45 percent from December 2019 to June 2022, when Covid emerged and then gripped the nation. That rate of increase over such a short interval had never happened in the history of the U.S. national home price index, dating back to 1987, which the economist Karl Case and I first developed.

Now that growth in the index has started falling on a month-to-month basis, with the annual growth rate down from 18.1 percent in the year ending in June 2022 to 15.8 percent in the year ending July. This may seem a small drop, but it is important to note because it’s the largest deceleration in the history of the index and comes in the face of strong momentum in home prices. It leads one to consider whether the forces behind that 45 percent increase are going to continue.

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Inflation Is Not a Simple Story About Greedy Corporations

2022-02-08T21:42:00.002-08:00

The word “Bidenflation” appeared in the news last summer, politicizing inflation and assigning blame for it. By December, the Consumer Price Index had risen 7 percent from a year earlier, the largest annual increase since the end of the Great Inflation, the period of entrenched inflation from 1965 to 1982.

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Should You Buy a Home in the US?

2021-10-25T20:34:00.004-07:00

Even at currently elevated US home-price levels, buying still makes sense for those who are set on ownership. But buyers need to be sure that they can accept what could be a rather bumpy and disappointing long-term path for home values.

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Stock, Bond and Real Estate Prices Are All Uncomfortably High

2021-10-02T07:56:00.007-07:00

The prices of stocks, bonds and real estate, the three major asset classes in the United States, are all extremely high. In fact, the three have never been this overpriced simultaneously in modern history.

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Looking Back at the First Roaring Twenties

2021-04-17T15:15:00.000-07:00

We are in a second Roaring Twenties, or so you might think, from the countless comments suggesting that we are entering an exuberant decade that echoes the one of a century ago.

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Making Sense of Sky-High Stock Prices

2020-12-06T08:57:00.003-08:00

Many have been puzzled that the world’s stock markets haven’t collapsed in the face of the COVID-19 pandemic and the economic downturn it has wrought. But with interest rates low and likely to stay there, equities will continue to look attractive, particularly when compared to bonds.

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People Fear a Market Crash More Than They Have in Years

2020-10-23T18:12:00.000-07:00

The coronavirus crisis and the November election have driven fears of a major market crash to the highest levels in many years.

At the same time, stocks are trading at very high levels. That volatile combination doesn’t mean that a crash will occur, but it suggests that the risk of one is relatively high. This is a time to be careful.

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How to Navigate the Coronavirus Real Estate Market

2020-08-01T20:30:00.003-07:00

There are signs that pockets of the U.S. housing market are heating up, particularly in the suburbs and fashionable exurbs, to which people have been fleeing to escape the coronavirus.

Some first-time buyers are feeling a sudden hurry to buy, fearing higher prices if they wait. But they are also worried about the long-run outlook for home prices.

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Understanding the Pandemic Stock Market

2020-07-07T20:35:00.002-07:00

The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear. At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics can shed some light.

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Why We Can’t Foresee the Pandemic’s Long-Term Effects

2020-05-29T18:01:00.003-07:00

Longer-term analyses of the coronavirus pandemic emphasize that there is a good chance that it will fade within a year or two, especially if a vaccine or effective treatment appears.

I hope that’s true. But even if it is, I’m worried that the economy may not return to normal within that time frame.

Big events like a pandemic have the potential to leave behind a trail of disruption. They can create social discord, reduce people’s willingness to spend and take risks, destroy business momentum and shake confidence in the value of investments.

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Predictions for the Coronavirus Stock Market

2020-04-02T10:18:00.002-07:00

One prediction seems solid: The coronavirus epidemic will get much worse in the United States in coming weeks. But where the stock market is heading is much less certain.

It is too simple to assume that with its steep decline, the market has already discounted epidemiologists’ forecasts for Covid-19. By this logic, the stock market would fall further only if the virus turns out to be worse than forecast.

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The Two Pandemics

2020-03-31T08:43:00.003-07:00

Predicting the stock market at a time like this is hard. To do so well, we would have to predict the direct effects on the economy of the COVID-19 pandemic, as well as all the real and psychological effects of the pandemic of financial anxiety. The two are different, but inseparable.

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Now Available: Narrative Economics

2019-10-01T09:00:00.000-07:00

From Nobel Prize–winning economist and New York Times bestselling author Robert Shiller, a new way to think about how popular stories help drive economic events

In a world in which internet troll farms attempt to influence foreign elections, can we afford to ignore the power of viral stories to affect economies? In this groundbreaking book, Nobel Prize–winning economist and New York Times bestselling author Robert Shiller offers a new way to think about the economy and economic change. Using a rich array of historical examples and data, Shiller argues that studying popular stories that affect individual and collective economic behavior—what he calls "narrative economics"—has the potential to vastly improve our ability to predict, prepare for, and lessen the damage of financial crises, recessions, depressions, and other major economic events.

Spread through the public in the form of popular stories, ideas can go viral and move markets—whether it's the belief that tech stocks can only go up, that housing prices never fall, or that some firms are too big to fail. Whether true or false, stories like these—transmitted by word of mouth, by the news media, and increasingly by social media—drive the economy by driving our decisions about how and where to invest, how much to spend and save, and more. But despite the obvious importance of such stories, most economists have paid little attention to them. Narrative Economics sets out to change that by laying the foundation for a way of understanding how stories help propel economic events that have had led to war, mass unemployment, and increased inequality.

The stories people tell—about economic confidence or panic, housing booms, the American dream, or Bitcoin—affect economic outcomes. Narrative Economics explains how we can begin to take these stories seriously. It may be Robert Shiller's most important book to date.

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What People Say About the Economy Can Set Off a Recession

2019-09-14T08:35:00.002-07:00

When will the next recession arrive?

Economists are evaluating such factors as President Trump’s endlessly shifting tariff policy, the monetary policy of the Federal Reserve and other central banks, and such “leading indicators” as the yields in the bond market.

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The Trump Narrative and the Next Recession

2019-08-30T08:20:00.003-07:00

So far, with his flashy lifestyle, the US president has been a resounding inspiration to many consumers and investors. But his personal narrative is unlikely to survive an economic downturn, because people pull back during such periods and reassess their views and the stories they find believable.

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Modern Monetary Theory Makes Sense, Up to a Point

2019-03-29T20:26:00.003-07:00

The term “modern monetary theory” has been talked about so much lately that we mainstream economists need to try to understand it.

We’re having trouble, though I’m beginning to suspect that it may be because M.M.T., as it’s often called, is really just a voguish name for a group of old and, for the most part, sensible ideas, repackaged in a new form.

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Was the Stock-Market Boom Predictable?

2019-03-29T09:21:00.001-07:00

While the conventional wisdom holds that it is never possible to "time the market," it might seem that major shifts – like the quadrupling of the US stock market over the last decade – should be at least partly foreseeable. Why aren't they?

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Morality and Money Management

2019-01-22T10:55:00.000-08:00

Following his recent death, Vanguard Group founder Jack Bogle was widely and generously eulogized – and justifiably so. But if everyone followed Bogle’s investment strategy, market prices would turn into nonsense and would provide no direction to economic activity.

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The Housing Boom Is Already Gigantic. How Long Can It Last?

2018-12-09T12:57:00.002-08:00

We are, once again, experiencing one of the greatest housing booms in United States history.

How long this will last and where it is heading next are impossible to know now.

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Silent Inflation

2018-11-23T08:24:00.001-08:00

Inflation targeting is supposed to reduce uncertainty about prices. But keeping the inflation target at 2% or more, might actually increase a sense of uncertainty about real things like home values or investments.

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Protecting Workers Without Tariffs

2018-09-26T16:03:00.000-07:00

Do Spectacular Earnings Justify Spectacular US Stock Prices?

2018-09-24T10:05:00.001-07:00

With share prices and corporate earnings moving together on a nearly one-for-one basis, one might conclude that the US stock market is behaving sensibly, simply reflecting the US economy’s growing strength. But the stock market has not always been so dismissive of the volatility of earnings.

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The Economy Grew Even Faster in Truman’s Presidency. So What?

2018-08-11T16:05:00.003-07:00

Based solely on a few headline numbers, the American economy looks good. But it would be a mistake to read too much into the data — or to give too much credit to President Trump.

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How to Protect Workers Without Trade Tariffs

2018-07-17T11:33:00.003-07:00

Donald Trump’s trade war is an international tragedy. But it could have a happy ending if it eventually reminds us of the risks that free trade imposes on people, and if we improve our insurance mechanisms to help them.

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Once Cut, Corporate Income Taxes Are Hard to Restore

2018-06-24T15:23:00.003-07:00

The Trump corporate income tax cuts are the latest in a decades-long trend of tax reductions that have been substantially reversed mainly during times of war.

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