Perhaps I should have been more careful in my wording when I referred to Dr. Shiller having an incentive to "scare" the market. Dr. Shiller has been one of the most pessimistic prognosticators regarding the housing market forecast for the next several years - with U.S. home prices falling to the tune of 40 percent over the next decade. Who in their right mind would buy a home if such predictions are to be believed? When people ask me if Dr. Shiller is purposely trying to scare the market for his financial benefit, I reply that he is a well-respected scholar and I believe he genuinely believes that home prices will deeply contract. I further add that I do not think he wants to personally profit from people using hedging strategies as offered by his company MacroMarkets. It is a financial innovation that may indeed bring many societal benefits at some point by spreading risks to those who can presumably better handle them. However, one key element that has been missing in this discussion is disclosure.
Bob Shiller has never hidden his relationship with MacroMarkets. In fact, nowadays when he writes paper and goes on TV, he is identified as being with Yale and MacroMarkets. I am not sure there is much more that he could do to disclose.
So that I disclose fully, I worked for the Wisconsin Realtors Association when I was a graduate student from 1987-1990, and consulted with NAR on their existing home sales rebenchmarking. I think the EHS series is well done, but of course I have every reason to think so.
As we know well, busts are preceeded by booms. If Mr.Yun is concerned about Mr. Shiller 'scaring' the market during this downward home price adjustment, isn't it fair to ask whether Mr. Yun was helping his milion members to fan the price inflation during the last 5 years ? What did he say in his NAR briefs about the affordability index, the huge divergence between HPI and GDP and wage growth during the run up ? Did he advocate caution or the same 'real estate has proven to be a good long term investment, always a good time to buy a home, can't call the top or bottom,etc' rhetoric ?
ReplyDeleteThat's what I've been calling: "Yunning it up"
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