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Boston, epicenter for the next housing bubble?

Posted by Scott Van Voorhis July 14, 2009 09:00 AM

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That is the intriguing, if somewhat depressing, idea floated by Yale economist and housing guru Robert Shiller in an interview posted on the Yahoo! Finance website.

Speculative overbuilding in markets like Phoenix and Miami helped inflate the last housing bubble, the one we are all trying to dig out from.

But Shiller notes singled out Boston as one of the markets that has performed relatively well during the downturn. And he raises the question whether the Hub might become ground zero for a new housing bubble.

He noted the volatility of the Boston market in recent years as something that, apparently, makes it vulnerable to bubble housing economics

Certainly home prices skyrocketed here during the boom, and have yet to come down as far and as hard as other markets.

“There could possibly be another bubble,’’ Shiller warns. “People have gotten very speculative in their attitude toward housing.’’

Shiller went on to say how such a second bubble might start forming, saying things could start shifting up and even become bubbly again in some markets after current overhang of foreclosed and unsold homes is burned through.

“If we get some good news … it could happen.’’

That said, Shiller made clear that this is not the most likely scenario he sees out there.

While the rate of decline in housing prices is starting to slow significantly, Shiller said the more likely scenario is more years of tough times ahead for the housing market.

“It could go on languishing for many years,’’ Shiller warned.


This blog is not written or edited by Boston.com or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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