Shiller on Housing: 'I am Terribly Conflicted'

This morning Robert Shiller, Yale professor and co-creator of the S&P Case-Shiller Home Price Index, joined me. It was a fascinating interview. I’ve never seen the professor this way. He was incredibly uncertain about the future. Incredibly conflicted about where we are headed. What made today’s interview with Professor Shiller so intriguing is that he’s one of the leading economists who predicted the asset bubble in the stock market and in housing. In fact, he said the housing bubble was inextricably linked to the finance world. He was right!

Today it was clearly visible that the historical data he looks at to predict the future is not working. The current appreciation in housing and other economic indicators are not what the models would suggest. Time and time again he said “this is a time of great uncertainty.” He’s clearly puzzled by the rapid appreciation in home prices while disturbed by the “bail out economy” and the national deficit. He admitted, “Things seem to be working right now but we’re in a GRAND experiment.” I found it incredibly telling.

At one point I said, “You seem so conflicted.” He said, “I am terribly conflicted. This is the most uncertain time that I can remember. Things are violating the laws that I learned. The turn around in real estate is so dramatic. The whole country is experiencing an upsurge but I don’t know what to make of it.”

Take a look at our interview. When the best admit they don’t know, there is reason to believe we are in unchartered territory.