Published: 28th October 2009

US: Shiller warns prices could be in “bubble territory”

US: Shiller warns prices could be in “bubble territory”
Robert Shiller, the man who predicted the dot com bubble in his best-selling book Irrational Exuberance has warned that house prices in some areas of the US could be approaching bubble territory.

Home prices in certain areas like San Francisco, have risen by double-digits over four months, and if viewed on an annualized basis, they look like they are in "bubble territory," Shiller said.

U.S. home prices in August rose for the fourth straight month. The Standard & Poor's/Case-Shiller composite index of home prices in 20 metropolitan areas rose 1.2 percent in August from July…the prominent fact that we are seeing with this data is that home prices are just zipping up." said Shiller.

“Bubble” could have much further to run

"It is entirely possible that even with the bad news we are getting, home prices could start a major increase….what happens from here will depend on people's animal spirits and speculative impulses," he said.

He also predicted rising unemployment would not stop prices increasing. "Even in the Great Depression real home prices were rising with the unemployment rate above 12 percent…Just because we have high unemployment does not mean the stock market cannot boom and the housing market cannot boom”.

Agents and investors specializing in US distressed property sales could be in for a bumper few years.

Further coverage from Reuters.

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