Yale's Shiller: Optimism Lifting Home Prices

" Improvement in home prices during the month of August but today's market -- and co creator the index warned that this trend. Just won't last he's Robert killings -- professor of economics. Does this morning good to see you my -- if you're concerned about the sustainability. Of home prices coming why."

" Well this is the biggest turnaround we've ever seen since April of this year. Home prices have gone up 5% in some cities San Francisco 12%."

" Minneapolis 13%. So something is going on. The question is just what in the question as to how much of that is due to the stimulus and the home buyer. You know tax credit and things like that and and how much is -- changes in the distressed sale pattern."

" What worries you doubt that if their rising home prices has fueled solely by the fertilizer for five by Washington DC. --"

" Big national goes beyond the housing market we're living in a bailout economy right now. We have the government it's they'll have so many of our banks and our investment. Banks and and in advance you know this the national debt is soaring and the deficit and the there's always problem but right now we're in a good mood it seems to be working and it's a grand experiment and it's may be working. And people are are optimistic relative they have not that often more so than they were a little while ago and it's pushing home prices up."

" What scares me is -- the guy who was predicted. Several of these bubbles particularly the bubble in housing and its correlation to finance. And there's a great deal of skepticism when you speak you're nervous about something what scares you most -- all week creating another asset bubble."

" Well. It seems unlikely to me that although it's not it's now going out for the last few months. Like bubble territory but from a very low level. It seems to me unlikely that it's going to be the big bubble all over again. But on the other hand -- you can't rule even though we have you know almost 10% unemployment. He can't rule out this could be the beginning of some kind of uptrend I think probably not aside this is where I am. Probably not but it's in the back of my mind that it could. Go up substantially. You know not doubling -- you have substantially. Just because psychology drives these markets in psychology has shown itself to be so violent."

" When you say that this could be the beginning of an uptrend or a doubling do you mean in home prices or in the stock market. "

" Well actually both the stock market that that's another thing it's not just the."

" You know the first time home buyer tax credit because we see the same thing happening in the stock market. The stock market had its biggest surge since March. That's that is bigger than anything we've seen since the Great Depression."

" So things are very involved. And we I don't think that we can really forecast and I I. It was asking me but I don't really have a clear forecast now because we're living in such unusual times. We just really I think it's a time of great uncertainty both about the stock market in the housing market. "

" What does that fear of unknown to you because that uncertainty is something that a lot of executives in corporations around the country are very worried that. We have concern about whether or not it's it's real estate whether or not it's health care whether or not it's cap and trade. But the danger there to all this uncertainty."

" Well the danger is that it hits our animal spirits that's the title of my new -- for a the idea that I've been advancing with my colleague -- is that psychology drives the economy more than most people would say. And the idea we have gotten more optimistic in a matter of six months or eight months. Partly because of a new government -- you know new plan and a international cooperation as you know other countries it. Cooperating it's looking really good but the problem is we don't know that it is real and that that's and that could bring. Declining."

" You always say I don't write a book unless I know something not writing a book right now. So what but what is that that thing right now that keeps you want that. What is it that concerns he."

" Well I look. I hate to bring up the Great Depression. But it's on everybody's mind that this was that car. I think happened was -- depression scare and now we're deciding. That it's over. That I hope that's right. That the scare was just a bad dream and we're moving out but I also remember that in the Great Depression itself they had a similar recovery. In 1933. And it it was good it was impressive that it you know the stock market finding it I think it tripled between 32 and 37. But it never quite got back to -- sound solid economy and to the depression it lasted until World War II. That the problem is that there's so many things inhibiting this sound economy that -- capitalist economy functioning normally. That I'm worried that we won't happen to be the same problem again that we won't have a a spirited recovery. We'll have a live recovery and might go on for years."

" George Soros has recently said. Great probability of the double dip recession -- 10102011. Wilbur Ross has stood here and said. I am really worried about commercial real estate. Can only have a recovery without a recovery. In both residential and commercial real."

" We can have a weak recovery that's we'll. I suppose. -- your and you refer to these people point out that we do have a serious problem in commercial real estate and despite my optimistic sounding words we could have a serious problem in single family homes as well. Because those prices could resume that downward movement. And that. That will put us in difficult situation balance sheets are already out of whack and get more out of -- if that happens you conflict -- And apparently convicted right now. This is the most uncertain time that I can remember. Is most of our time -- because things are violating the laws of and I've learned you know things the turnaround in real estate. Is so dramatic I've never seen it before. We have -- a similar turnaround briefly in Pakistan San Francisco in 1991. Was a San Francisco. This is the whole country is has this sudden upsurge in home prices. And sudden -- surgeons in the stock I don't know what to make in this. What is it in write me back and six month."

" the that we all know if you. Your writing your next book then I'll know that you figured out the answer Robert good to see you thank you for being."