Yale University Economics Professor and Nobel Laureate Robert Shiller tells FOX Business Network how Americans perceive a policy change by the Fed is almost more important than an interest rate increase itself.
Continue Reading Below
“I think the psychological impact is far more important and could be positive if people think ‘well, at last we’re coming out of the new normal, maybe some people will think that, especially if the interest rates increases continue.”
Shiller, co-creator of the S&P/Case-Shiller Housing Price Index, also weighed in on how Fed policy impacts Americans’ decision on buying a home.
“Well, I tell them that investing in a house is a big decision, you know, talking to the average home buyers, that shouldn’t be too contingent on goings on in the Fed, there’s a likely trajectory of higher rates, and so you might consider that but it’s not a major, we can’t be certain enough about any changes in mortgage rates to make that a big issue right now.”
Wednesday, housing starts and permits, signs of future demand, rose 10 percent in November. Even so, Shiller remains cautious on housing.
“The housing activity has been disappointing ever since the financial crisis, it’s up to, residential investment is like 3.5% of GDP, it hasn’t taken off and in the same sense home prices are not up, not in real terms, to the levels they were in say 2006, back then we had 6% residential investment, way higher.”