Thursday, October 29, 2009

US home prices may hit bubble

(NEW YORK) The gains in US home prices in recent months may not be sustainable and increases in some areas of the country appear to be in 'bubble territory', an economist known for his property market expertise said on Tuesday.

Robert Shiller, an economics professor at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, told Reuters Television that he does not give quantitative forecasts on where home prices are headed but is concerned about the recent pace of increases.

Home prices in certain areas, such as Minneapolis and San Francisco, have risen by double digits over a mere four months, and if viewed on an annualised basis, they look like they are in 'bubble territory', Prof Shiller said. 'It is a time of great uncertainty,' he added.

US home prices in August rose for the fourth straight month. The Standard & Poor's/Case-Shiller composite index of home prices in 20 metropolitan areas rose 1.2 per cent in August from July, topping the estimate of a 0.7 per cent rise according to in a Reuters poll.

'The prominent fact that we are seeing with this data is that home prices are just zipping up,' Prof Shiller said. 'It is entirely possible that even with the bad news we are getting, home prices could start a major increase.' Prices in the top 10 US metropolitan areas gained 1.3 per cent in August after a 1.7 per cent rise the previous month, according to the S&P composite index. - Reuters

Source: Business Times, 29 Oct 2009

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