Early this month, Nobel laureate Robert Shiller sat down with Bloomberg to discuss a wide range of topics. Shiller talks about the US-China trade war, current consumer spending level, and drops a heck of a bomb on why he thinks the US housing market could be entering a downturn after a decade bull run.
Robert Shiller warned in his interview that the rise in the recession fears, driven by narratives such as the US-China trade war and the inversion of US Treasury yield curves, could be just enough negativity in the news to weigh on the psyche of the American consumer.
He suggested that the American Nightmare of spending money you don’t have to keep up with the Joneses could be at a tipping point due to the narrative of a worldwide recession led by China and Germany. Considering the US economy is roughly 67% consumer-driven, any pullback in consumer spending would most likely result in a much broader slowdown, especially with a US manufacturing contraction and transportation plunging.
Starting at the 4-minute mark of the video, a Bloomberg anchor asks Robert Shiller if housing prices are due for a pullback. Shiller calm states that, “I wouldn’t be surprised if home prices started falling, and it could be accompanied by a recession.”
His index, the S&P CoreLogic (Case-Shiller) 20-City home price index rose just 0.11% month over month, missing economists’ expectations of a 0.2% rise. The index slowed to a 6.31% year over year gain, which is the weakest since December 2017.
This slowdown in the S&P CoreLogic (Case-Shiller) 20-City home price index could be what Robert Shiller meant when he told Bloomberg that, “This could be the very beginning of a turning point.”
We eagerly await the results of the Denver Metro Real Estate report on the September numbers to see if Robert Shiller’s prophecy is coming true.