February 23, 2009
– Comments (2)
Here's Professor Shiller.
I don't think XXIIVII is a valid Roman numeral.
Shiller got the tech bubble right. He got the housing bubble right. I'd bet he's going to be in the ballpark on the bottom for housing prices too--another 30% or so to fall to get back to trend and they will probably fall more because at that point everyone will talk about how it is a sucker's bet to buy a house.
Over the weekend, I did the rent vs. buy calculation on the place I'm renting in Luxembourg. Everyone here says house prices won't fall. I say they will. Rental yields are only 3.5-4%. Prices need to fall by about 40% before it makes sense to buy (maybe a little less, 0.05% property tax makes buying substantially more attractive here than in other places).
No offense to my neighbors, but I'm hoping for prices to tank. Actually, I don't think they care. None of them intend to sell--crazy Europeans actually buying a house because they intend to pay down the mortgage. Plus, most of them would prefer for prices to be lower so that they could believe their kids will be able to buy someday.