Cultural changes have made a huge impact in the housing market, in light of the bubble and respective burst seen over the course of the last six years, says Rober Shiller, co-author of the widely regarded S&P/Case-Shiller home price indices.
Today, largely favoring renting versus owning in the current credit and interest rate environment, Americans have shifted in response to the housing market crash. But in the long haul, Americans will still own homes, Shiller told attendees of the National Investment Center for the Seniors Housing and Care Industry (NIC) conference Thursday in Chicago.
“Most people in the U.S. think there is a shift toward renting right now—a preference shift toward renting,” Shiller said. “Household formation has been shifting dramatically toward rentals. But American people have a longstanding commitment to homeownership. It may diminish somewhat, but it isn’t going to disappear.”
Americans have reacted to the bubble and burst, but the shift in the home market is largely cultural, Shiller said. “You can’t describe [American behavior] as a reaction to Fed policy, or any policy. There was a major turning point in 2005, at the same time media jumped on to the idea we were in a ‘housing bubble.’”
Noting the current uptick seen in housing, Shiller says for some cities and regions the news is better than for others. Homeownership will rein stronger in some places as well.
Cities like Phoenix, San Francisco and Washington D.C. have seen, in some cases, double-digit gains over the last two years, bucking the overall trend of a smaller, more seasonally recognized uptick in home prices. Nationally, recent reports indicate that summer prices saw a national increase of more than 9%.
“Maybe it is an upturn, but I don’t think we should think it is another boom. That boom was unique in American history. We can see a boom like that in some cities, but nationwide, it’s unlikely. It is a boring, modest increase we might be having.”
Written by Elizabeth Ecker