Last week, famed Yale economics professor Robert Shiller told Reuters there might not be a housing market rebound for an entire generation.
Yes, an entire generation. Or longer…
He told the news service that there’s a chance we won’t a “major turnaround in our lifetimes,” though he was speaking in the first person to other old people presumably.
So ideally us young bucks (and our children) will see a housing turnaround or two before we croak or get cryogenically frozen.
Why Shiller is Pessimistic
But why is Shiller so down on the housing market?
Well, he pointed to ongoing issues, such as high unemployment, steep gas prices, and general uncertainty from American consumers, who still seem rattled from the financial collapse that took place several years ago.
These issues continue to offset the record mortgage rates designed to increase confidence in the housing market, buoy flagging homes prices, and improve affordability.
Interestingly, his dark prediction comes at a time when home prices are on the rise, albeit marginally.
The S&P/Case-Shiller home price index of 20 metropolitan cities climbed 0.2 percent on a seasonally adjusted basis in February, the first increase in homes prices in 10 months.
But if you break it down by city, you’d notice that nine of the 20 cities in the index were actually down or flat for the month.
Real Estate is Local!
In other words, real estate is, and will always be, local. While these indices are great (grain of salt) to gauge the overall health of the economy, they won’t do much to tell you when it’s the right time to buy real estate in your neck of the woods.
They also won’t be able to help you determine if home prices in your area will rise or fall, or if they’ve bottomed.
That’s because real estate is local, and even micro-local.
Ever notice that a house on one side of a street is much more valuable than the same type of house on the other side of the block?
Perhaps one part of a city is experiencing a boon, while another is dying off quickly for one reason or another.
There are so many seemingly minute details that a single report just can’t address.
[Don’t buy the most expensive house on the block.]
Are Walking Cities Our Future?
That said, Shiller believes suburban areas may actually continue to see falling home values as the price of gas increases.
In other words, there may be fewer individuals willing to drive an hour and a half into town on their daily commute if the cost is skyrocketing.
These types of people may conclude that it makes more sense to rent in the city in which they work, or pay more to buy for the convenience.
Either way, you can see why being close to things can make a difference. Of course, things like good schools, lot size, and crime issues will still make suburban living a plus for many.
This again fortifies the principle that real estate is very, very local and specific to the buyer at hand.
Finally, don’t fret because of these doom and gloom predictions. They’ve been around forever, and will continue to surface. But guess what? Life goes on…
Read more: Is now a good time to buy a house?