Nov. 6 (Bloomberg) -- The U.S. housing recovery is a fragile one and should be spurred by reducing the role of government in the mortgage-finance system, said Robert Shiller, a professor at Yale University and co-creator of the S&P/Case-Shiller index of property values.
“There are positive signs, the problem is that it’s not a really strong positive sign yet,” Shiller said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu today. It is “not a resounding recovery,” he said.
Americans bought new homes in September at the fastest pace in two years, indicating that the industry whose decline was at the heart of the recession is bouncing back. Sales climbed 5.7 percent to a 389,000 annual pace, the most since April 2010, following a revised 368,000 rate in August, figures from the Commerce Department showed on Oct. 24.
“We have to get back to a private-sector mortgage market, without government dominance,” Shiller said. “We have to think about alternative mortgages that don’t invite the same sort of crisis where we have 10 million homeowners under water. We don’t want to put Americans in such leveraged positions.”
Republicans in Congress have called for an end to the Fannie Mae and Freddie Mac, the mortgage finance companies put under government conservatorship in 2008. Treasury Secretary Timothy F. Geithner has said he will propose a housing-finance overhaul that may include dismantling the firms. While Geithner said at the beginning of this year that the administration would release a wind-down plan by the spring, no plan has been released.
Separately, Shiller said that with unemployment at 7.9 percent, the U.S. economy needs further fiscal stimulus to create jobs. He said increases in spending should be offset by higher taxes on the wealthy proposed by President Barack Obama to avoid enlarging the national debt.
“It would be tax increases Obama set on the wealthy, and at the same time, expenditure increases -- that’s a balanced-budget stimulus,” he said. “It doesn’t raise the national debt, but it stimulates the economy. We need something like that.”
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