House prices are still very high – so hold off on buying as the US economy will keep struggling, Yale economist Robert Shiller says
- US house prices still look very high, according to Yale economist Robert Shiller.
- "Maybe if you have a good chance to delay your purchase, it might be a good time to do so," he told CNBC.
US house prices still look very high – so potential buyers should consider delaying their purchase for another six months with the economy's struggles likely to continue, according to Robert Shiller.
"It's easy to forecast the short-run in the housing market, if you're a long-term buyer it's not clear," the Yale economist told CNBC's "Closing Bell: Overtime" Monday. "Home prices are very, very high by historical standards."
"I would extrapolate the downturn somewhat — it's going to continue," he added. "Maybe if you have a good chance to delay your purchase, it might be a good time to do it."
"It might get a little cheaper after another six months."
The S&P CoreLogic Case-Shiller Index, which is based on Shiller's own analysis of US housing with fellow economist Karl Case, shows that home prices fell six months in a row between July and December, the last available reading.
Rising interest rates have helped fuel the housing slowdown. The Federal Reserve has lifted borrowing costs from near-zero to around 5% over the past year — and that's pushed national average 30-year mortgage rates to just below 7%, according to Bankrate data.
But Shiller believes that there's at least six months of declines left to come, based on his view that key policymakers will eventually accept a recession that helps to drag down prices.
When there's an economic downturn, unemployment is likely to go up. That reduces the number of Americans who can afford houses and stops landlords from raising rents.
"That's the capitalist system with a central bank," Shiller told CNBC. "I think it works pretty well most of the time and I wouldn't tinker too much with it."
"We have smart people on the Fed and the Treasury Secretary I admire, Janet Yellen," he added. "They may have to accept something of a recession."
The latest edition of the Case-Shiller Index, set to be released at 9am Eastern Time Tuesday, will show the extent to which US house prices rose or fell in January 2023.