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Housing market reminiscent of 2006 bubble, ready to burst 鈥Nobel Prize-
winning economist Shiller
Published time: 5 Nov, 2018 06:40
The weakening housing market is similar to the last market high, just before
the subprime housing bubble burst a decade ago, says famed housing-watcher
Robert Shiller.
The economist, who predicted the 2007-2008 crisis, told Yahoo Finance that
current data shows 鈥渁 sign of weakness.鈥br />
Housing pivots take more time than those in the stock market, Shiller said,
adding that 鈥渢he housing market does have a momentum component and we鈥檙e
seeing a clipping of momentum at this time.鈥br />
Read more
A trader (c) on the New York Stock Exchange reacts on October 19, 1987 as
stocks are devastated during one of the most frantic days in the exchange's
history 漏 AFP / Maria BastoneEchoes of Black Monday: Market sell-off could
get 鈥榮ignificantly worse鈥- strategist
The Nobel Laureate explained: 鈥淚f the markets go down, it could bring on
another recession. The housing market has been an important element of
economic activity. If people start to get pessimistic about housing and pull
back and don鈥檛 want to buy, there will be a drop in construction jobs and
that could be a seed for another recession.鈥He added: 鈥淏y the way, we
鈥檙e overdue for another recession.鈥br />
When reminded that 2006 predated the greatest financial crisis in a lifetime
, Shiller acknowledged that any correction would likely be far less severe.
鈥淭he drop in home prices in the financial crisis was the most severe drop
in the US market since my data begin in 1890,鈥the Yale economist said.
鈥淚t could be that we鈥檙e primed to repeat it because it鈥檚 in our memory
and we鈥檙e thinking about it but still I wouldn鈥檛 expect something as
severe as the Great Financial Crisis coming on right now. There could be a
significant correction or bear market, but I鈥檓 waiting and seeing now.鈥br />
READ MORE: Decade after financial crisis JPMorgan predicts next one鈥檚
coming soon
The infamous US housing bubble in the mid-2000s and the subsequent subprime
meltdown were key factors spurring the broader financial crisis of 2008. A
speculative frenzy over house prices, mortgages beyond long-term
capabilities to finance, and eventually a wave of defaults by borrowers,
threatened the solvency of some key financial institutions which in turn led
to a stock market crash, and the global financial crisis. | b*w
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