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<\/a><\/figure><\/div>\n\n\n\nLawrence Yun, chief economist of the National Association of Realtors\u00ae, stated in a November 8th news release<\/a>, \u201c\u2026existing-home sales have shown a 20 percent cumulative increase over the past two years, while prices have gained 18 percent, but incomes have risen only 2 to 4 percent in the same timeframe<\/em>.\u201d Additionally, it is expected that existing home sales to maintain 2013 gains through 2014; and home prices to continue and upward trend (realtor.org). <\/p>\n\n\n\n The 2014 prediction for U.S. housing<\/a> sounds great. But does this mean we are expecting increased multiple offer situations with further plummeting of average days on market? In a post housing bubble world, some wonder if this year\u2019s real estate activity is sustainable \u2013 maybe it was no coincidence that some descriptions of hot housing markets sounded like the go-go market that occurred during the housing bubble years. And yet with hindsight, should we be concerned about \u201cpriming the pumps\u201d for another housing bubble?<\/p>\n\n\n\n Sentiment about over-valued markets around the world was expressed by none other than Robert Shiller. Shiller, of the S&P\/Case-Shiller Home Price Index, won the Nobel Prize in Economic Sciences this year for the \u201cempirical analysis of asset prices.\u201d And if Robert Shiller is talking about over-valued markets, maybe we should listen.<\/p>\n\n\n\n Shiller\u2019s book, \u201cIrrational Exuberance<\/em><\/a>\u201d is said to have made the argument for the dot-come (2000 edition) and housing (2005 edition) bubbles, as well as predicting the subsequent market crashes. (Interestingly, the book title is said to be taken from an Allan Greenspan speech described the rapid cycling stock market activity of the mid 1990\u2019s.)<\/p>\n\n\n\n Two weeks after Janet Yellen\u2019s confirmation hearings to become Chairperson of the Fed, Robert Shiller was interviewed by the German magazine Der Spiegel. Yellen\u2019s responses to Senators<\/a> during the hearing suggested that there were no bubbles in equities and housing, although she conceded that bubbles are hard to predict; while Shiller expressed concern about over-valued equities in many markets throughout the world, as well as a sharp rise in home prices in some global real estate markets (including some U.S. real estate markets such as Las Vegas). Shiller made specific mention of the U.S. Stock market saying that data is suggesting an equities bubble. However, as he cautioned that it might be too early to sound the alarm, there is an expectation that the market will go even higher.<\/p>\n\n\n\n Is this the new real estate economics? <\/p>\n\n\n\n Are bubbles such a bad thing? Economist Matthew Klein (Is the Only Choice Bubbles or Recession?; Bloomberg; Nov 19, 2013<\/a>) speculates that bubbles may actually be an important part of a modern economic cycle that allows for growth in various sectors. He states \u201c\u2026bubbles can transform wealth that would otherwise be stashed in government bonds and other safe assets into income for those who work in the expanding parts of the economy.<\/em>\u201d However, many economists assert that eroding wealth and savings to artificially grow an economy is dangerous and unsustainable.<\/p>\n\n\n\n How will real estate economics play out? Getting back to the NAR press release, Yun credited the current sales and price trends to a lack of housing inventory and buyer demand. Unfortunately, housing inventory <\/a>is at about a thirteen year low; and unless inventory increases we can expect an interesting year ahead. <\/p>\n\n\n\n by Dan Krell
\u00a9 2013<\/p>\n\n\n\n<\/a><\/figure>\n\n\n\n