Economist Robert Shiller suggests there is a “real chance” we may have a long way to go before the US housing market recovers:
Many young people are choosing to live at home for a longer period of time instead of buying. Moreover, would-be homebuyers are settling into modern apartments and condominiums, further hindering a housing rally. Shiller says the shift toward renting and city living could mean “that we will never in our lifetime see a rebound in these prices in the suburbs.”
A perpetually sluggish housing market, which Shiller believes has become “more and more political,” might push the country in a “Japan-like slump that will go on for years and years.”
I imagine there are a lot of people who hope Shiller is very wrong. If you watch the full video here, Shiller also suggests there is a chance for a rebound. The discussion is based on this data:
Home prices in January were flat compared to the prior month, suggesting stabilization in the market, but home values fell for the fifth-straight month and prices dropped to their lowest levels since 2003, according to the Standard & Poor’s/Case-Shiller Home Price Index. Housing prices declined 3.8 percent on a year-over-year basis. The index measures the value of home prices in 20 U.S. metropolitan cities.
The key prediction here is that suburban housing prices may not rebound for decades. What are the implications of this? I wonder if this means that we may finally witness a suburban growth plateau, meaning that because people will have more difficulty moving in and out of their houses, suburban growth will have to slow. Of course, this may change after a few years as people adjust to their mortgages and either move out of being underwater or pay enough off to make some money when they sell. But there would still be fewer people looking for homes, leading to less demand for new homes.