Starting Now, Join the Live Chat with Robert Shiller and David Blitzer

Hi, I’m Dave Guarino, Director of Communications at S&P Indices. Welcome to today’s virtual chat on the U.S. residential housing market. With me today to answer your questions are: Dr. David Blitzer, Managing Director and Chairman of the Index Committee, S&P Indices; Prof. Robert Shiller, Professor of Economics, Yale University and Prof. Karl Case, Professor of Economics Emeritus at Wellesley College.

Please remember to refresh your browser throughout the hour to receive live updates from the chat.  We are accepting questions til 10:05am.

To ask a question, simply type your question into the field below and click “submit“. Either Dr Blitzer, Prof Shiller or Prof Case will respond to your inquiry. OK, let’s begin the chat!

UPDATE: At this time, we are closing the chat.  Unanswered questions will be posted to HousingViews.com this week.  Come back to see more q&a.

You can watch Dr. Blitzer, Prof Case and Prof Shiller at 10:20am this morning on CNBC.

Thank you for your participation today.
Q.
what about Condos?
A.
David BlitzerMixed at best Chicago and Boston are up 2.9% and 2.6%; LA, San Francisco and NY are down 0.1%, 0.5% and 0.8%. Year-over year they’re all down. Compared to their peaks, La, Frisco and Chicago are all down more than 30%; Boston and NY down around 15%. More detail will be posted this week on HousingViews.
Q.
Anything up? Anything showing strength?
A.
David BlitzerWashington DC continues to be among the strongest. LA, NY and Boston also look good – these cities have the largest gains since 2000. Denver and Dallas are closest to their peaks as anyplace. All of these, and some others, don’t look like the sunbelt or Detroit.
Q.
Where are the worst spots?
A.
David BlitzerThe sunbelt – Las Vegas, Phoenix, Tampa, Miami plus Detroit. In the sunbelt real estate and home construction was a growth industry. It is barely an industry now. In Detroit, autos were the economic base, no more.
Q.
What do you think the effect of the very low new construction rates will be for home prices in a few years?
A.
David BlitzerThis is Chip Case. Every downturn prior to the year 2000 in housing production has been caused by rising interest rates in response to the danger of inflation. When demand drops in most markets, prices fall. In the housing market people refuse to lower their asking prices and lots of property stays on the market. What happens in the housing market is that production drops and the number of households increases until balance is restored. For the past 45 years housing starts has ranged between one millions and two million. Since January of 2006, production has dropped sharply to 60 year lows and has stayed there for three years. Household formation on the other hand have dropped like a rock and actually the latest data suggests that household formation has gone negative.
Q.
In your estimation what is the main factor in keeping prices flat and down year over year?
A.
Robert ShillerHome prices have generally been falling since 2006– almost five years. The home buyer tax credit introduced by the ARRA Act in early 2009 and extended, expired in early 2010 so home prices have resumed their downward trend after support was withdrawn.

Q.
Any theories as to why the seasonal impact on housing has increased?
A.
Robert ShillerThe Lehman crisis began in Sept. 2008 and was extreme until the summer of 2009 so that coincides with the winter months and that may have exacerbated the estimated seasonal decline of those months.

Q.
What would you expect short/long term regarding housing should the mortgage deduction be eliminated on high earners?
A.
David BlitzerShort term downward pressure on home prices especially expensive homes. Long term much less of an impact. Several years ago tax rules on second homes became less favorable. The lasting impact was not large.
Q.
: In your seasonally adjusted index, do you feel that the seasonal adjustments are representative of this historic marketplace?
A.
Robert ShillerOur estimated seasonal factors are growing stronger. This may reflect anomalies of the financial crisis. Seasonality is hard to judge right now.

Q.
Are there specific economic factors that are still negatively impacting the housing market?
A.
David BlitzerYes. First, it is difficult for home buyers to qualify for a mortgage. Second, Fannie Mae and Freddie Mac will lower the size of conforming mortgages on October 1st. Finally, consumer sentiment is still poor.
Q.
Looking ahead does Professor Shiller still see a big drop in prices the rest of the year?
A.
Robert ShillerIn a Feb. 2011 S&P webinar I warned that the real prices in the housing market could possibly decline substantially. I said 10-25% over the next few years. The recent data lowers the probability of that scenario a little bit but I still worry about it.
Q.
How much is nation wide data on home prices influenced by CA, FL, NV and AZ?
A.
David BlitzerQuite a lot. CA and FL represent one third of the value of housing. NV and AZ add a bit more. Looking across the country there are some other weak spots such as Detroit and a few strong spots such as Washington DC.
Q.
Have the two months of gains caused you to change your housing market views?
A.
David BlitzerThis is Chip Case. A little. There is a big difference between bouncing along a downward drift and bouncing along a rocky bottom. Basically all the numbers we’ve seen over the past 6 months (starts, existing sales, new sales and so forth) has been flat. The fact that prices in a repeat sales index and using a three month moving average actually went up. It seems to me says, something important.
Q.
If you had to include the three most key variables or metrics correlated with the future direction of the housing market, which would you choose?
A.
Robert ShillerMost important is the recent trend in home prices. After that the employment situation and after that survey measures of home buyer confidence such as the National Association of Home Builders Housing Market Index or the data that Karl Case and I have been collecting about home buyer attitudes.

Q.
How many months of improvement will you need to see before you have any confidence that an uptick in prices is sustainable?
A.
Robert ShillerWe have found that price changes over the preceding years are helpful for forecasting future price movements although the recent months are more important than the more distant months. Many other factors contribute to the outlook for home prices and I would never be confident just extrapolating recent upticks in home prices. The aggregate economy is at a turning point and there is much uncertainty now.
Q.
Please comment on the recent Pew Center release regarding the wealth gap in the US as it relates to the housing recovery.
A.
David BlitzerThere are studies showing increasing income in equality in the US. In our Tiered Indices, we see that high priced homes are recovering from the bust while low priced home continue to see falling prices. We will post on our blog an analysis of the Tiered Indices later this week.
Q.
Given the large shadow inventory in the market, are we still far away from hitting the bottom on prices?
A.
David BlitzerCan’t tell for sure, to turn up we need both less inventory and a lot more optimism. Most home buyers still seem pretty worried.
Q.
Do you think that the seasonal impact on housing has diminished?
A.
David BlitzerNo. Our studies of the last few years show that seasonality seems to be increasing. We expect continued seasonal impact through the fall.
Q.
Can you give a quick overview of the numbers
A.
David BlitzerThe full report is at www.homeprice.standardandpoors.com and also on HousingViews.com. The 20 city composite was up 1% in May after gaining 0.6% in April and is down 4.5% from May 2010. The 10-city composite is similar – up 1.1% on the month compared to up 0.6% last month but is down 3.6% from May 2010. Month to month 3 cities were down, year over year 19 cities were down. Last month it was 6 down month to month and 19 down year over year. Three new post-peak lows – Detroit, Tampa and Las Vegas. Virtually all the pick up looks seasonal.

The posts on this blog are opinions, not advice.
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