Shiller is sticking with the irrational exuberance that plays into housing decisions – and I agree:
The co-creator of the much-watched S&P/Case-Shiller home price index doesn’t think the mortgage interest deduction really matters to the housing market.
“It’s not big,” said Yale economics professor and Nobel laureate Robert Shiller.
He also doesn’t think home prices will fall if the cap on the amount of mortgage debt (currently $1 million of debt) one can deduct interest payments on is cut in half. About 2.9 million borrowers have mortgages with an outstanding balance higher than $500,000, according to Black Knight.
“The general idea is it would push prices down if people are rational,” which Shiller says they are not when it comes to housing. He is the author of the bestselling book “Irrational Exuberance.”
He does, however, think that if homeowners can no longer deduct their property taxes, or if the amount they can deduct is limited under the new tax plan, that would be a big deal — at least to rich people.
“That is going to be a substantial hit to people who are paying a lot of property taxes, and it might be a consideration that you make before you buy a big mansion in some high property tax state,” said Shiller.
While economists, housing advocates and housing industry lobbyists argue the effects of the Republican tax plan and worry about the possibility of higher interest rates, Shiller, who has studied the economics of housing dating back to the 1800s, sees very little rhyme or reason to any of it. The human factor — the emotional aspect of most people’s single largest investment, a home — is far greater than the market stimuli that are accorded such importance.
“I tend to think it’s not as great as you imagine because people are people, and I don’t find that historically home prices have relied at all predictably to changes in things like interest rates,” said Shiller, pointing to the huge boom in housing in the last decade. Interest rates didn’t move at all during that time.
That boom, instead, was fueled by a complete crater in any type of lending standard in the mortgage market. People were offered loans at almost no cost, so they took them — and never believed that home prices could fall. In the early 80’s during a huge spike in interest rates to double digits, home prices fell slightly, but people kept buying homes.
“Things happen that have no explanation,” said Shiller.
Click to play video below:
“…. About 2.9 million borrowers have mortgages with an outstanding balance higher than $500,000…”
And nearly every single one used to donate to the politicians who will vote for this. Used to.
used to donate to the politicians….
Between the politics and the sexual-harassers, future elections could turn out quite differently than expected today?
Shiller seems to be putting his final blessing of the rediscovered, founding theme of our country, established during our Revolutionary War: “Sh*t happens, get over it.”
Hopefully, this marks the effective beginning of the end of our nation’s preceding era of “Wah! Waaaaah!!”
Under “Wah Waaaaah” leadership, nothing ever ends, and nobody is personally accountable without a twitter-informed judge’s decree. It’s a lousy collective mindset, and left alone, tends to turn culty, as people learn to monetize, and culturize it.
By my reckoning, it’s a new day, and we’re going back to the old way.
Because it works.
Another sign of this: I thought Al Franken was gonna cry today, but he pretty much didn’t. Okay, a little whining, and finger-pointing, but he didn’t CRY!
That’s a very good sign, as our new era continues to find it’s legs:
https://www.youtube.com/watch?v=RTVqZNObw5o
mu understanding is they grandfather in all existing loan and apply the new limits to new purchases, either after nov 2 or something or they might pick 12-31..am I correct?
or they might pick 12-31..am I correct?
Yes, that is the Senate plan right now, and those who can secure a sale prior to Jan 1 can close in 2018.