Despite reports from U.S. Media sources that the real estate bust is over, Yale professor Robert Shiller is still skeptical. Best known for his research that produced the S&P/Case-Shiller house price indices for the U.S., Robert Shiller was one of the first to identify the real estate bubble before the crisis. Shiller is reluctant to say the ‘coast is clear’ because he believes there still is not enough “momentum,” which he believes is one of the biggest factors in rising home prices. With several months of price rises, one would believe that there is certainly “momentum,” but Shiller believes there are other factors that could negatively influence this perceived momentum.

One factor, Shiller points out, is the large number of homes in foreclosure or about to be in foreclosure. This lends to an element of fragility in the rise home prices we are starting to see. Another factor, and the second biggest driver of home prices, is the high rate of unemployment in the U.S. If the rate of unemployment continues to rise, this will cause home prices to stagnate.

One important point that Shiller brings up is related to speculative bubbles in real estate. I’ve been writing about this for weeks and no one else has taken me seriously. In the last ten years, people in the U.S. have been, “primed to think speculatively,” as Shiller says. He believes we’ve gotten into a stock market type mindset about real estate. He is quoted as saying, “At other times in history, little attention has been paid to timing the housing market. There was a change in our mindset. Now we start thinking about the housing market as like the stock market.”

Shiller thinks speculative bubbles are rearing their ugly heads right now in several U.S. cities, namely San Francisco and Phoenix, which have risen 5.7% and 14%, respectively, on a seasonally-adjusted basis since bottoming. Many of you will say that prices went down so low that this would be expected. However, many of you have seen the “feeding frenzy” of greedy buyers who are lining up to make overpriced offers, that can make a property not such a good deal.

Shiller would like to see home prices continue to rise through the Spring before he feels the coast is truly clear. Any comments on this hot topic? Please share.

Read the entire WSJ article at this link: http://blogs.wsj.com/totalreturn/2012/08/06/is-this-the-end-of-the-housing-bust-not-so-fast-says-shiller/