Shiller's Case on U.S. Home Market Weakens `a Bit' as Indicators Improve

The U.S. housing market may not be as weak as Robert Shiller, co-creator of the S&P/Case-Shiller home price index, described it earlier this month.

Reports this month have shown improvement since Shiller’s April 9 New York Times article “Don’t Bet the Farm on the Housing Recovery,” the Yale University professor said in a Bloomberg Radio interview with Tom Keene.

“The indicators have turned up, so my case has weakened a bit,” Shiller said. “While home price increases began to slow in November, they haven’t declined on a seasonally adjusted basis. We’re kind of in a holding pattern, where it’s very hard to tell.”

The National Association of Home Builders/Wells Fargo index of builder confidence increased this month more than economists forecast, and the Commerce Department reported that U.S. builders broke ground on more homes in March than anticipated.

While momentum may keep home prices from sliding, Shiller said the psychology of the marketplace may put the recovery at risk as people continue to be slow to buy homes after the worst economic slump since the Great Depression.

“I don’t know that we’ve got our real housing animal spirits back,” he said. “There could be a correction down because this is not a solid, emotionally secure recovery. People feel damaged.”

Confidence is the key ingredient to a sustainable economic recovery, Shiller and Nobel laureate George A. Akerlof wrote in their book “Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.”

The economy may improve “for a while” and then pull back for a double-dip recession later than expected, Shiller said.

The S&P/Case-Shiller index of home prices in 20 cities climbed 0.3 percent in January from the previous month on a seasonally adjusted basis, matching the gain in the previous month. The report for February is due April 27.

Shiller and Karl Case, an economics professor at Wellesley College, created the index based on research from the 1980s.

To contact the reporters on this story: Mary Childs in New York at mchilds5@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

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