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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (60501)	8/22/2006 11:44:45 PM
From: Les H	Read Replies (1) \| Respond to of 306849

Rosenberg thesis on 'hard' landing theglobeandmail.com

To: Les H who wrote (60501)	8/22/2006 11:51:21 PM
From: John Vosilla	Read Replies (1) \| Respond to of 306849

I thought Mr Toll and others have commented that building costs are dropping recently?

To: Les H who wrote (60501)	8/23/2006 7:49:36 AM
From: ChanceIs	Respond to of 306849

>>>Building costs soar<<< I referenced a NPR broadcast of a Robert Shiller interview. Shiller of course is the Yale economist who while not predicting an outright real estate bust, says we are in the bubble of all bubbles. He attributes the bubble to east credit, and mania. Notably he does not attribute it to construction costs/materials. Somewhere there is a chart with housing prices and materials. Housing prices far out strip materials/construction costs. I have been having trouble locating Monday Night's broadcast, but here is an NBR interview with Shiller in early July: ___________________________________________________ KANGAS: Many wonder whether the recent run-up in real estate prices is the result of a speculative bubble much like the one that occurred in high- tech stocks in the late nineties. In the new edition of his book, "Irrational Exuberance," Yale University economics professor Robert Shiller contends that indeed seems to be the case and he joins us now from New Haven. Professor Shiller, welcome back to NIGHTLY BUSINESS REPORT. Hi. KANGAS: First, I understand that you tracked the long-term returns from U.S. real estate and you found that in most years since 1890, home prices actually rose at less than the rate of inflation. Does that mean the recent run-up in home prices is unprecedented? ROBERT SHILLER, PROFESSOR OF ECONOMICS, YALE UNIV: It is unprecedented. The only comparable episode was right after World War II when the soldiers came home after the construction had been stopped during the war. It had an understandable boom in home prices. The current boom doesn`t seem to relate to fundamentals. For example, you compare it with construction costs or interest rate or population growth, there just doesn`t seem to be anything there that would explain the sudden surge in home prices. KANGAS: So what to what do you attribute the huge gains in home prices that we`ve seen? SHILLER: A theme of my work has been psychology plays a huge role in financial markets, especially aggregate markets and I`m talking (ph) about individual stocks. And I think that the stock market boom of the `90s kind of had a hiccup - there was kind of a - the enthusiasm went from after the earnings bust, it went from stocks to housing. That`s one story you can tell (ph). It`s complicated, but it`s about human behavior and it`s about the excitement about markets that drives the market. KANGAS: So if most of the recent rise in home prices is due to psychology, then the public attitudes about housing as an investment change, could we see real estate prices drop rapidly as happened with stocks in 2000, the bubble burst so to speak. SHILLER: Well, I first have to say I don`t know what will happen with the market. But it`s certainly a possibility. When you have a lot of people buying houses or buying more housing than they otherwise would, because they think the price is going to go up, how are they going to be behaving when they perceive prices as flat or even falling and they may want to sell. That`s a very elementary economic. KANGAS: It`s been said that many of the baby boomers plan to move from their homes and downsize when they retire. Does that suggest to you that a mass sell-off of single family homes could be on the horizon? SHILLER: The baby boomer is one effect. That`s one thing that has helped drive home prices and I don`t want to over emphasize that. But there is, that is in effect, that as people retire, they`ll maybe want to shift away from the bedroom community around the big city, either to the center city or to some vacation area and want to sell their houses. That`s coming up over years. But there`s something more immediate that`s coming up with data that`s just coming out that the housing boom seems to be losing steam rather rapidly in that the NAHB index of traffic of prospective buyers has just taken a huge drop in the last few months. And so that`s a sign that - and you never know. The housing could turn around and become another boom, but it`s a sign to be concerned right now. KANGAS: Professor Shiller, thanks for those fascinating insights into the recent boom in real estate. pbs.org