If you predict that the time will be 6 p.m., you’ll be right twice a day.
If you forecast rain, you’ll be correct – eventually.
Robert Shiller was right eventually, too, when he projected a bursting of the housing bubble. He had to be right – eventually. Yet it was years before his doomsaying came true.
At the same time, the Case-Shiller Indices, which the Yale economics professor and his pal, Karl E. Case issue monthly, also can be right – but only if you put them in the following perspective:
- The data are old;
- The indices cover no more than 20 metro regions;
- Metropolitan Statistical Areas (MSAs) comprise wide swaths of a regio. For example, the New York MSA encompasses such wildly different communities as Staten Island, the New Jersey suburbs, Westchester County and Manhattan;
- Not a single condo or co-op sale is considered;
- Shiller’s narrative is almost always hedged – on the one hand and then the other.
Sunday’s New York Times devoted fully a half page to the economist’s ramblings, and I still don’t know whether he’s for or against a U.S. housing policy that encourages home ownership. Says he:
“If we choose to keep subsidizing individual homeownership, we must also commit to adding safeguards so that homeowners are less financially vulnerable. Of course, that will require some creative finance.
“But first, we should rethink the idea of renting, which could be a viable option for many more Americans and needn’t endanger the traditional values of individual liberty and good citizenship.”
You may be surprised to learn see a real estate broker speculating about the wisdom of a costly U.S. policy that subsidizes through tax benefits the borrowing of money to leverage the purchase of homes. Yet I agree that the policy is questionable.
Still, all Professor Shiller offers as an option is. . . nothing. Saying that the nation needs “to consider a gradual transition toward new kinds of housing finance institutions,” he concludes, in part, what journalists characterize as a thumb-sucker this way:
“We need to invent financial institutions that take into account the kinds of communities we want to build. And we need to base this innovation on an approach to economics that captures the richness of human experience — and not on efficient-market economics, which disregards human psychology and assumes that our basic institutions are already perfect.”
And that would be exactly how and what?
In my view, it’s fine to say change is necessary. But it’s not okay to write a nearly impenetrable article that fails to outline what changes to make.
On the other hand, what do I know? My formal economics education never went beyond an intro course in graduate school, making me wish too late that I had majored in the field in college while failing to prevent me from spouting my unschooled opinions.
Certainly, I’ve learned enough to know the difference between a column of substance and one that evokes cotton candy.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022