With the release of the Case Shiller home price index on Tuesday there is always some follow on reporting of the numbers. Earlier today CNBC interviewed Robert Shiller, co-creator of the index, to get his take on the effects of Hurricane Sandy and his outlook for the housing market. You can listen to the interview below – but you don’t need to go past 5:49.
Of course the headline for most of the stories reporting on this interview is that Robert Shiller believes it will take 50 years for the housing market to recover. In fact, that’s not exactly what he said as you can judge for yourself. What he did say was that it might take 50 years for the housing market to get as big as it was during the bubble – and it was way too big for its own britches at that time so no wonder it might take 50 years to get there. In addition, he points out that home prices will probably only match inflation and rise about 3% per year. But matching inflation is what home prices normally do, as confirmed by Robert Shiller’s own analysis, and if your home goes up in value by 3% per year while you are paying interest at 3.5% then it only costs you 0.5% per year to live there – before taxes and maintenance. That’s a pretty good deal.