Shiller: Housing warms up, but no bubbling

The talk of whether there is now a new bubble in housing is becoming cocktail-party discussion fodder yet again. But is there actually a bubble?

Yale economics professor and co-namesake of perhaps the most popular housing price index (the S&P/Case-Shiller HPI) weighs in on the topic this weekend in an op-ed in The New York Times.

His op-ed says housing is warming up, but that bubble talk is too early. He bases his thinking on a longitudinal survey of homebuyers Yale University has undertaken annually since 2003. His takeaway from the most recent of these surveys:

We updated the survey in May and June. The results suggest that though we are not in a bubble now, there are troubling signs that we may be heading toward one.

Perhaps somewhat quizzicly, one sign Shiller says that a bubble isn't forming right now is strong demand for rental investments :

Here’s another indication that we are not now in bubble territory: Some 10.6 percent of respondents said they bought a home “only to rent out to others.” That proportion has been rising irregularly since 2004, when it was just 2.7 percent. The change likely reflects the recent tilt in demand toward rental housing, which isn’t likely to sustain high prices in scattered suburban housing.

At HW, we know plenty of industry experts that would beg to differ, pointing to investor interest in rentals as a sure-fire sign of a housing bubble.

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