tag:blogger.com,1999:blog-1110014885778996459.post8901656225560506762..comments2024-03-29T00:15:52.716-07:00Comments on Idiosyncratic Whisk: Dr. Shiller, heal thyselfKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-1110014885778996459.post-12040601329934846302016-01-14T23:29:56.473-07:002016-01-14T23:29:56.473-07:00Great questions. I think this is a post where I co...Great questions. I think this is a post where I cover some of this:<br />http://idiosyncraticwhisk.blogspot.com/2015/07/housing-tax-policy-series-part-47.html<br /><br />Rent inflation had only moderated when housing starts were very strong in 2003-2005. It shot up after prices stalled and housing starts and sales started to collapse in 2006. With foreclosures, owner equivalent rent started to fall in 2007 and 2008, but tenant rent remained elevated until 2009.<br /><br />If we hadn't had a series of policies unconsciously aimed at undercutting the housing market and the Fed had raised raised to, maybe 4.25% and held it there in 2005, I think prices would have generally held. They may have corrected a bit in Phoenix, etc. And housing starts would have remained strong.<br /><br />Although, the more I'm looking at the migration issue regarding households moving out of the high cost cities, I'm not sure exactly what would have happened in cities like Phoenix. If economic growth continued to strengthen and economic stress would have led migration to intensify, maybe those secondary markets would have continued to have unusual price pressures. It may be that this situation will eventually lead to a breaking point, regardless of public policy, if economic growth persists and skilled workers keep moving into the Closed Access cities. It does seem clear that states like Texas would have avoided the housing collapse.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-92218930335796338032016-01-14T22:03:14.260-07:002016-01-14T22:03:14.260-07:00Oops, I only just realized this is a 6 month old a...Oops, I only just realized this is a 6 month old article.Anonymoushttps://www.blogger.com/profile/07928458476301534836noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-82366308401815485772016-01-14T22:01:33.959-07:002016-01-14T22:01:33.959-07:00Kevin, when you note that rent skyrocketed rather ...Kevin, when you note that rent skyrocketed rather than collapsing, you are referring to the several years before the housing bust, correct? <br /><br />One could try to argue that causality went in the opposite direction to what you are arguing: that rising housing costs are driving more people sell their homes and rent, which in turn drives up rent. If the people who are selling are primarily selling cheap homes, and enough people are buying second homes (or speculative homes), or buyers are in general buying more expensive homes (or throw in Schiller's idea of people just bidding up and overvaluing houses), then couldn't you in theory simultaneously see rising demand for houses while at the same time seeing an increase in the number of renters, and therefore demand for rental housing? This narrative might be particular appealing after home ownership peaked in 2004 but prices kept going up. (though I don't know whether homeowneship means number of homes owned or number of people or households that own one or more home). Not that I'm prepared to defend this narrative, but just figured I'd engage in a thought experiment. Perhaps in your encyclopedia of graphs you have one showing housing prices lagging rent?<br /><br />Of course, I imagine if speculation or other 'gratuitous' homes are a negligible enough share of the housing stock, and assuming everyone has to live somewhere, then any change in demand for houses or rental property will be followed by an immediate change in the opposite direction by the other one, so perhaps distilling which happens first isn't easy.<br /><br />A little off topic (if you've already written on this in another post, feel free to just refer to it) : what do you think would have happened with the housing market if the fed had never raised the interest rate in 2006?Anonymoushttps://www.blogger.com/profile/07928458476301534836noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-20902570476175091292016-01-14T21:33:07.657-07:002016-01-14T21:33:07.657-07:00Perhaps it can be said that he predicted the housi...Perhaps it can be said that he predicted the housing crisis for the right proximal reason but the wrong distal reason. One can be right about noting noticing demand outstripping supply while wrongly assuming it's because demand is going up too much rather than because supply is going too much. Or at least he's smart enough to know that predicting a crisis is a great long term investment for an economist, bound to pay off in withing 10 or 20 years.Anonymoushttps://www.blogger.com/profile/07928458476301534836noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-82010014502733034052015-07-30T16:00:15.055-07:002015-07-30T16:00:15.055-07:00I don't think you're boxing above your wei...I don't think you're boxing above your weight here. Shiller started giving a speech about the stock market bubble in 1995. The fact that he didn't fill out the concept and finally publish that book until 2000 makes him seem like a genius. And I'm sure he is a genius, or at least very smart. But his predictions really don't show it. His 10 year CAPE has given a sell signal for the last 2 decades or more except for 1 year - 2009. How can that be useful?billhttps://www.blogger.com/profile/13479694656531252175noreply@blogger.com