The U.S. housing market may be headed for a crash, according to 2013 Nobel Laureate for Economic Sciences Dr. Robert J. Shiller. Shiller, citing the S&P CoreLogic Case-Shiller index, notes that property values in 20 cities decelerated for a 15th month in June, increasing 2.1% from a year earlier. Shiller noted that adjusting for inflation, prices had already flattened.
“It would suggest declining home prices in the near future,” Shiller told Bloomberg Television on Thursday. “I wouldn’t be at all surprised if house prices started falling.”
Also falling were price gains in 10-city composite, which dropped from 2.2% to 1.8% in June. The 20-city composite posted a 2.1% annual gain, down from 2.4% the prior month.
“While falling mortgage rates have thus far only led to an increase in refinancing, rather than purchase activity, there will undoubtedly be a large boon to the marginal homebuyer,” said Ralph B. McLaughlin, Deputy Chief Economist and Executive of research and insights for CoreLogic. “Thus, we should expect the lengthy slowdown in home price growth to flatten or even tick upwards by the end of the year assuming the U.S. economy avoids any present-day threats of a recession.”
Six of the 20 cities in the composite reported higher price increases against the prior month.
Phoenix overtook Las Vegas for the market with the highest annual price growth at 5.8%. Home prices in Las Vegas grew year-over-year by 5.5% and Tampa Bay followed with a 4.7% increase. Atlanta, Georgia, and Detroit, Michigan, were close behind with annual growth at 4.5% and 4.2%, respectively.
Realtor.com’s Senior Economist George Ratiu called home price gains in June “sluggish,” and said that some buyers have been priced out of the market and others expanded their search to more affordable neighborhoods.
“Although recent economic news has prompted discussion of an impending recession, there’s a silver lining for buyers: more buying power,” Ratiu said. “As we head into the fall season, buyers can expect to see their dollar stretch further due to the downward trend in mortgage rates, as well as the seasonal slowdown in home prices.”