Shiller warns of bubble-like home price increases

Oct.October 29, 2009 11:05 AM

Home prices in many U.S. metropolitan areas are nearing so-called “bubble territory,” according to Robert Shiller, co-founder of the Case-Shiller home price index. Home prices in the U.S. are “zipping up,” according to Shiller, as the S&P/Case-Shiller composite index of prices in 20 metro areas showed a 1.2 percent rise in average home prices from July to August. Certain U.S. cities, like San Francisco, have seen double-digit upticks in average price, a trend that could end badly, the economist said. Still, Shiller said that it’s difficult to determine how the rising prices could ultimately affect the market. “It is entirely possible that even with the bad news we are getting, home prices could start a major increase,” Shiller said. “What happens from here will depend on people’s animal spirits and speculative impulses.” Shiller sat down with CNBC today to analyze the sharp turnaround in prices.

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