The U.S. housing market is likely to remain weak and may take a generation or more to rebound, Yale economics professor Robert Shiller told Reuters Insider on Tuesday.
Shiller, the co-creator of the Standard & Poor’s/Case-Shiller home price index, said a weak labor market, high gas prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on prices for the foreseeable future.
“I worry that we might not see a really major turnaround in our lifetimes,” Shiller said.
The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.2 percent in February on a seasonally adjusted basis, the first uptick in prices in 10 months.
But Shiller called it “a very mixed bag.” Nine of the 20 cities recorded falling or flat prices on the month. He said suburban areas in particular might endure further price declines as high gas prices increase demand for “walkable cities.”
Meanwhile, it was the first time prices have risen since April 2011. That gain was itself an anomaly in a string of declines stretching back to May 2010.
Average home prices across the country were back to late 2002 levels, the report said, as the non-seasonally adjusted 20-city index fell 0.8 percent to 134.20, the lowest since October 2002.
“Even with today’s data, the broad prospect for home prices is at best flat over the course of the year,” said Tom Porcelli, chief economist at RBC Capital Markets in New York.
“And as much as we have had progress with the supply and demand imbalance, it is still a challenge to gather any momentum here.”
A separate, government report showed new single-family home sales sagged in March to their lowest level in four months, but sales in the prior three months were revised higher than initially thought.
The Commerce Department said March sales slipped 7.1 percent to a seasonally adjusted 328,000-unit annual rate. February’s sales pace was revised higher to 353,000 units, the fastest pace since November 2009, from the previously reported 313,000 units.
“The conditions in housing are still extremely weak, but there are some very subtle, less negative, signs suggesting stabilization there,” said Sean Incremona, economist at 4Cast Ltd in New York.
Another report showed consumer confidence fell slightly in April, while Americans also reined in their inflation expectations after a surge in the previous month.
The Conference Board, an industry group, said its index of consumer attitudes edged down to 69.2 from a downwardly revised 69.5 in March.
Expectations for prices in the coming year cooled to 5.8 percent from 6.2 percent. March’s inflation expectation was originally reported as 6.3, the highest level since May 2010.