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Why Robert J. Shiller is wrong about HHI home pricing

Posted by THE LOVE FAMILY on Thursday, December 13th, 2018 at 9:00am.

low tide at Baynard Park in Sea Pines on Hilton Head Island

Robert J. Shiller, Sterling Professor of Economics at Yale University, has made a name for himself over the years with the S&P/CoreLogic/Case-Shiller National Home Price Index. He's acclaimed for tracking national real estate trends and issuing warnings about the market when he thinks it's overheating.

In his recent article, "The Housing Boom Is Already Gigantic. How Long Can It Last ? published in the New York Times, Professor Shiller has just raised a red flag of warning from the data he's collected and freshly analyzed. He says, "We are, once again, experiencing one of the greatest housing booms in the U.S. history," and, "The data can't tell us when prices will level off, or whether they will plunge catastrophically. All we do know is that prices have been roaring higher at a speed rarely seen in U.S. history." 

I'm sure the Noble Laureate professor is correct with his analysis on a national level but here on Hilton Head Island, Professor Shiller's remarks couldn't be further from the truth. His data shows national home prices are up 53 percent from the market's bottom in 2012. Up 40 percent when factoring in Consumer Price Index for inflation. Our local MLS sales data for Hilton Head Island shows our median sales price increasing 15 percent, from $470,000 at the end of 2012 to $544,500 through September of 2018. We haven't entered into an overheated market with pricing by any means but our real estate transactions have increased 29 percent during this same time frame.

Professor Shiller goes on to say, "My data shows that this is the United States third-biggest housing boom in the modern area." He points to his data showing home prices are 11 percent higher than what they were at the peak of 2006. We're not even close to that on Hilton Head Island. Our peak median sales price in 2006 was $740,000 and through September of 2018, it was $544,500. Our home pricing still lags 26 percent below the market's crest in 2006. It wouldn't appear the Island is poised for a catastrophic plunge in values.

From the high water mark in 2006 until the tides ebb in 2012, the one thing in common we shared with the U.S. housing market was a price decrease of 35 percent nationally compared to 36 percent locally. But, unlike the rest of the country, we haven't roared back and pushed to new heights. We've been doing more of a Texas Two-step across the dance floor, slow and steady.

While it's important to know the national real estate trends and what the big thought leaders are saying, it's equally important to know what's happening on the Island to avoid missed opportunities in our market.

Local Realtors have suspected our market was undervalued and Professor Shiller's article appears to confirm this. It's nice to realize the Island is offering good bargains vis-a-vis the rest of the country. For expert advice and fiduciary care when buying or selling real estate on Hilton Head Island, please contact us today!

THE LOVE FAMILY

DAVID LOVE | REALTOR®
Sea Pines Real Estate at The Beach Club
Mobile: 843-290-5644
Email: David@DavidLove.com

NANCY LOVE | REALTOR®
Sea Pines Real Estate at The Beach Club
Mobile: 843-290-3069
Email: Nancy@NancyLove.com

KATHY LOVE | REALTOR®
Sea Pines Real Estate at The Beach Club
Mobile: 843-290-5654
Email: Kathy@KathyLove.com

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