Robert Shiller – Housing Prices will Level Off Over the Next Two Years

Following a year of record increases, Robert Shiller expects housing prices to level off over the next two years. But, he said, there could be declines.

Shiller is a professor of finance at Yale University. He spoke via a conference call hosted by Barclay’s Investors for its RIA clients. The talk was focused on the economic forecast for 2022.

Based on the CoreLogic Case Shiller price index, single-family home prices increased 19.7% in the last year (17% in real terms), which Shiller said was a record. “It is interesting that this happened during the pandemic,” he said.

Home prices are more “inertial” than other prices, Shiller said. He helped establish a futures market for housing and said that quotes on it are flat, meaning that no increases are expected over the next couple of years.

“It is plausible that the boom will diminish,” he said. But housing prices have risen relative to construction prices so the demand for existing homes will likely go down. If that doesn’t bring prices down, supply will increase and decrease prices.

“The outlook for home prices is not as positive as many think,” Shiller said.