Two Big Housing Risks-Ending Fed Stimulus & Speculation-Professor Robert Shiller

Two Big Housing Risks-Ending Fed Stimulus & Speculation-Professor Robert ShillerBy Greg Hunter’s

Yale Professor Robert Shiller says, “People who were thinking about buying a house last year are kicking themselves.  Prices are up 12% in a year.  As the market tightens, the attractiveness diminishes, but it’s still attractive.”  Professor Shiller, who is one of the founders of the S&P/Case-Shiller Home Price Indices, sees two big possible headwinds for housing.  One is the Federal Reserve ending or “tapering” its $85 billion a month bond buying program.  Shiller contends, “I think people were really surprised at how much the mortgage rate reacted to the Fed merely talking about tapering off this bond buying program.  Just the talk pushed up interest rates the better part of a percent.”  The other headwind, Dr. Shiller says, “We might slip into another recession.  China, India, Brazil and Russia are all slowing down.  People are getting edgy about that may be just as big of a risk as the pull-back of Fed stimulus.”   Dr. Shiller goes on to say, “The really big question on everybody’s mind is-is this something big, this home price boom over the last year.  Is this boom going to last 9 years?  I think not.  Join Greg Hunter as he goes One-on-One with Yale Professor Robert Shiller.

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  1. john

    this interview was a testament on why you are so good at what you do! robert shiller didnt want to say much regarding negative influences with the current rigged fed mortgage buying that’s influencing home prices in this country. he skated over your questions until you repeated them and basically wore him down. the last 2 minutes of the interview said it all, the rest was filler for the real estate community. i’m sure he sat down wanting to sound upbeat about the upward increases in home prices. great job, greg, of getting him to open up and really address your questions that are more likely to derail all the false price increases that the fed has manufactured with stupid low interest rates of 3%!

    • Greg

      Thank you very much. Some people think I am being mean or interrupting. I am digging at the truth and I got some from Dr. Shiller!!

  2. Mohammad

    Thank you Greg for another spectacular interview, i think am left with his last remark, if we will enter another recession (as if we are not in a DEPRESSION) and you buy a house now you may not end up happy!

    • Greg

      People thought Dr. Shiller was crazy when he wrote his book “Irrational Exuberance.” He was early NOT crazy. I would not bet against him now. Thank you for your comment.

  3. j.c. Davis

    Greg. Robert Shiller is a very smart man. The better buy in my mind is a small house on the right land with a spring feed creek.
    What I see the economy doing is bottom jumping rather then bouncing.
    Soon to be bottom sitting, as everyone piles onto the free ride mentality of stocks. Assuming printing paper money is wealth. Good interview. Thanks

  4. art barnes

    Greg, the good professor got it right, unlikely for a long term housing market upside. This current “boom” market is going to fail because the new norm is for part time hiring, those people will never be able to afford a home mortgage even at artificially rigged low interest rates. Sooner or latter there’s just not that many buyers for the market. If your readers don’t believe its a part time employment world out there they haven’t been unemployed in a while. Sadly to say, its not just a trend any longer, its the new norm. Beyond the part time work you must also add in that those same jobs are mainly low wage as well. In a nutshell, all of the above means the middle class is shrinking at about the same rate in which it rose from the depression from the 30’s through the 80’s. The loss of the middle class will bring on all kinds of unpredictable events, crime, corruption, loss of family, just to name a few which are foreseeable.

  5. jerry

    Greg this was a really good interview. Mr. Shiller has a totally different perspective about the housing market than I do. Housing recovery? What housing recovery? We are still buying houses for pennies on the dollar every day. In Detroit you can’t even give one away. I am seeing people borrowing against their equity just to stay afloat in this stagnant market. People are literally hanging on by their fingernails. Greg let me be clear. The last 3 houses that we have sold have been financed by the USDA, VA departments respectively. I can’t remember the last time a private lender, loaned money on a home. The vast majority of our buyers are “Cash Buyers”. And they are picking up homes 30% or more below current market value because there is such a glut of foreclosures on the market. Each market is a little different by geographic area. Where my son lives in Ft. Myers Fla. he saw his home value drop from $280.K to $65.K Is buying a home there a good idea? You bet. But most lenders will not lend there, because the market is so overloaded with foreclosure homes. In fact if you don’t have cash, the Banks that are carrying the foreclosures don’t even want to talk to you. In many cases Freddie Mac and Fannie Mae have come in and bought huge inventories of foreclosures from the Banks, helping to stretch that national debt bubble a little further. If you go on Fannie Mae’s web site, you can buy a foreclosure home directly from them. They’ll even fiancé it to you. Did we really have a housing recovery? About as much as the employment figures the government puts out. As far as buying home now? Unless you can pay cash I wouldn’t. Otherwise you could find yourself upside down when the economic collapse comes. Can you imagine how cheap homes will be then?

    • Greg

      Thank you Jerry. I thought Dr. Shiller issued a profound warning!

  6. droidX-G

    Urgent…please call your congressmen and tell them that cars kill more children than any other weapon. This weekend another crazy person massacred innocents with a car. We should ban and confiscate cars. Only the police and military should have these massive human guided missiles. If only one child’s life is saved, its worth it!

  7. droidX-G

    Greg, I think its a complex question. If you have a job now, will you have it in the future to make the payments? What is the “real” value of what you are buying and what will it drop to in the aftermath? After the initial reset, will it retain its value?

    • Greg

      Got Au and Ag?

  8. Scot

    ‘Shill’er, what a great name. He does not understand the danger of QE and interest rates. He is nothing more than the typical Social ‘Edu-crat’ that cannot think beyond the Keynesian mantra. Sorry Greg, this interview does not fly….

  9. rich

    Great interview Greg. I hate to say it but you know more about the real estate market than Dr. Shiller. I can’t believe that he teaches. If I were a student, I’d demand a refund.

  10. AndyB

    Greg: Professor Shiller may be right. But I have a problem with the numbers needed to even start a housing recovery, much less sustain one. Once you eliminate:

    1. the 50% of the population on the Government teat
    2. the millions underwater on their current homes
    3. the overwhelming majority who don’t have the requisite savings, FICO score or full time employment to qualify for a mortgage
    4. the many millions between the ages of 25 and 40 who are massively burdened with student debt

    who’s really left?

    • Thadman

      Who’s really left? The Russian Mafia?

  11. Simon

    The propaganda being spewed that a housing supply shortage exists is nothing more than that, propaganda. Release the 8-10MN units in REO/Shadow housing inventory and lets see how the housing market reacts, not to mention, a normalized rate environment.

    In essence, absent further rate increases, a release of the shadow inventory in of itself would collapse the entire housing market to the tune of 25-35%, conservatively.

    The ‘Greater Fool’ theory is and has remained front-and-center with the Hedge Funds dumping on Jane & John Q public.

    Wall St. has a saying, “Heads WE win; tails YOU lose”.

    nuff ced~

  12. Paul


    Good to get Dr. Schiller’s take on the economy. He is unequivocal when he makes a prediction. He did not make one in this interview. Rather, he doesn’t appear overly concerned about the housing market. He recommends buying a house now and made it clear that there is no strong correlation between interest rates and housing prices.

    As for the mortgage deduction, I understand Canada does not have one and their housing market flourished.

    Dr. Schiller had a few concerns, but with every mention of possible collapse it was clear Armaggedon was not in the offing. He resisted being led into alarmist thinking. Essentially, things are getting better. Are there headwinds? Surely. They have been there, and always will be.

    Great to hear a learned man evaluate the situation. It gave me quite a bit of solace.

    Very insightful interview!

  13. Evan

    Interesting as to several of Mr. Shillers scenarios of doom in the housing market all ready upon us.
    In the past several weeks we have scene the 10 year T-Bond rates creaping up with just the hint of “Tapering”, (got to love these new word inflextions in our financial-english language) as well as recently another of his scenarios taking place with the hedge funds dumping as securitized debt instruments their home rental purchases as noted on zerohedge article :

    Just like the securitized debt mortgage packages that were sold to fools around the globe around the 2006-2008 collapse, here we go again. It is happening right now, not in our future, slow motion.

    Just my thought Greg. Keep up your great work, even if we take some of what the interviewee says with a grain of salt and a shake of my head.

  14. Jim H

    Thanks Greg
    Robert said many things. What I heard was “I don’t know what the hell is going to happen because all the old rules seem not to work anymore”. I must say this is at least an honest guy. You did ask him many difficult and important questions and frankly the questions were based on the rules of the past. What else do we have, right? As we are learning, many of the people who you interview should follow Roberts lead and say I don’t know anymore because the rules seem to have changed. Gold prices, the Constitution, Bill of Rights, college tuition, health care, Intelligence Surveillance and a vanishing middle class are just a few examples where one must scratch their head and say what the heck is going on. I’m glad you keep digging but fear the real answers lie in the hands of just a few. Keep pounding Greg, I’ll keep listening and act when a thing makes sense. Slim Pickens these days.

  15. PeterB

    wasn’t only about 6 months ago that Shiller said housing was not going up?

  16. Tadski

    Schiller said that the price of homes could still rise as before, even with interest rates moving up, as they did before. What he failed to mention and Greg failed to say was, yes they did, during the stagflationary 70’s and thats exactly where were heading! That 70’s show, rerun. That time period were we finally payed (in inflation)for that war,(Vietnam),in which we bought both guns and butter, not withholding the butter but cutting lose the printing of fiat dollars and creating a boom time on credit, instead of any little or no sacrifice from the American people, except the young men who were forced to give the ultimate sacrifice. (They truly were expendable). We didn’t pay up front, for our grimy little war, to let the good times roll as our guys fought an died. But we payed dearly for it in the seventies! Were we not only lost that war, a first also, but were humiliated and disgraced in the eye’s of the world and we were so broke Nixon had to tell the world, you cant have yer gold, but don’t worry be happy, we got the Saudis backing us on this. So we had the gold and the oil but then the Saudis tightened the screws on us, and all hell broke lose and if it wasn’t fer that gentle giant, both in stature, bravery and true grit, Paul Volker, we would have wound up in the dust bin of history a lot sooner. Fortunately as the greatest fed chairman in all human history, he put the screws to the good times and saved our assets! Volker let the rates rip, to 20%. He had faith in our system of government, that a teaspoon of sugar (his big smile with cegar) would help the medicine to go down and we would recover and we did by golly! But were’s Paul Volker today. Instead we got Paulson. Volker’s an old man now. He’s probably sorry to see all his work go down the toilet in the Debasement, and our septic field clogged with fiat toilet paper. Whats this world coming to? An end I hope. Not the one i’m sitting on, the Earth itself but the wicked putrid system thats soon to end to be replaced by a more gentle one. Hey i’m not gettin any younger. Go to youtube and type in Great Day by Der Bingle himself, old Bing Crosby. Bing new what he was singing about, there will be a great day. Don’t be one of them shaking your fist at the sky! Well I guess i’m not getton out of here, no were to run, i’ll just hold on to my poor mans toupee (baseball cap), and hold on to dear life. Just remember love is stronger than death and God is love! P.S. S t a g f l a t i o n, n: A period of slow economic growth and high unemployment(stagnation)while prices rise(inflation) Put that in yer pipe an smoke it Case Shiller!

  17. g.johnson


    I do not know where to begin in criticizing this interview. so many elephants in the room going completely unnoticed by the distinguished yalie.

    1. housing prices, while marginally down from the bursting of the bubble are still too high by a factor of 3-5 times their honest worth (and i think i am being conservative here).

    2. approximately half of available housing in the u.s. is being kept off the market by the banking industry for two main reasons. 1. to prevent a sellers market. and 2. to pad their asset sheets. (yes, they are holding debt and passing it off as assets)

    3. the housing bubble reached a point of critical mass back in the 80’s when “creative” financing came into being to help get people into houses that they otherwise could not afford. and through the efforts of the investment class housing prices managed to more than triple since critical mass began. ie, this doodoo is really really deep and those who make their money by investing in the housing market need prices to start heading up again. what could go wrong? oh yeah, it already went wrong and nobody fixed it. so here we go again, more bad paper, more evictions, more homeless, and the predators rake it all in and continue to avoid their just desserts.

    look, if you are into your home to the point where monthly payments, insurance and taxes combined are taking away more than 2o percent of your income, you are in too deep.

    if you are looking to buy a house, keep that 20% in mind and see if y can do it (good luck with that). for over 200 years in this country, that 20% was the benchmark standard that everyone went by. what happened?

    speculators happened. ok, they have always been with us, but now they are stark raving predators who could give a rats tush about the damage they cause.

    rent? ok, still 40-50-80% of your income going for rent. we are land of suckers with our noses buried in our little screen and little buds in our ears. we could not organize a serious boycott to save our lives. (literally, we can’t and for that we are in real danger)

    the bad guys rule….but they give us great toys.

  18. g.johnson

    oops, that shoulda said, “1. to prevent a buyer’s market”

  19. Jacopo

    Since when is the government taking less of your money a “Subsidy”? Mortgage interest write-off I don’t believe to be a subsidy.

  20. Derrick Michael Reid

    Gregg asks the question,
    why do homeowners get rewarded tax wise for going into debt.
    Because the oligarchsters, banksters seek to suck the people
    dry through debt, be it mortgages, credit cards, or the national debt
    and thus the banksters exert influence,
    over the politicians to increase public debt where possible,
    and the politicians spin it as helping housing and the people.
    Its part of totalitarian enslavement of the people as
    tax mules and state dependents enabling the banksters to
    suck the people dry through a debt regime. I hope that helped.

  21. Derrick Michael Reid

    Dr Shiller is part of the problem. He says that tax deduction,
    for interest payments, will encourage housing, and that
    is a government incentive, where there should be none,
    as incentives is part of the totalitarian play,
    tax and spend, take and give, inflate and rob,
    incentivize and control, socialize and corrupt.
    Dr Shiller in conventional in thinking, in the modern era,
    like 99.99% of the people, so disrespect intended,
    just observing the 100 year pandered mind set of Americana.

  22. Derrick Michael Reid

    Dr Shiller is part of the problem. He says that tax deduction,
    for interest payments, will encourage housing, and that
    is a government incentive, where there should be none,
    as incentives is part of the totalitarian play,
    tax and spend, take and give, inflate and rob,
    incentivize and control, socialize and corrupt.
    Enslave the people as tax mules and state dependents.
    Dr Shiller is conventional in thinking, in the modern era,
    like 99.99% of the people, so no disrespect intended,
    just observing the 100 year pandered mind set of Americana.

  23. Ed Hamilton

    Look at real price histories.
    Be sure to click on Discussion

  24. George

    Shiller asks, “What does “the market is fixed” mean?” with a straight face. He is a brilliant guy but it appears he is walking the edge of a razor in his answers. I remember when Bill Clinton argued, “What does “is” mean?” Dr. Shiller said, “this is not a normal situation.” in reference to the support given the housing market (ie Fannie, Freddie, and tax credits). I agree. Any time the government gets involved, it creates bubbles that don’t merely pop, they implode like a black hole.
    Doesn’t that observation on his part not negate his thesis that the housing market is recovering?
    In this economy, how can you tell if you have a steady job? I know people my age that have worked their entire life that can’t find a real full time job now.

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