ROBERT SHILLER: A Housing Bottom? What Are They Thinking?

Henry Blodget and Ben Walsh

I spoke with Yale professor Robert Shiller in Davos earlier this week.

Shiller has correctly identified (in advance) two major price bubbles in recent decades–the stock market bubble of the late 1990s and the housing bubble of the late 2000s.

One of the key attributes of most bubbles is that, when they finally burst, prices tend to “overshoot” on the downside, crashing well below fair value until all the exuberance is wrung out of the system.

So is that what’s going to happen to house prices this time? Or, as many people think, are house prices finally “bottoming” and getting reader to blast higher again?