Today, Robert Shiller won the Nobel Prize for economics for developing methods to study trends in stock, bond and house prices.
Apparently those methods aren’t compatible with the housing market north of the U.S. border.
In October 2008, when asked whether Canada faces a similar bust to what the United States experienced, Mr. Shiller said: “Yes, especially in places that went up a lot like Vancouver and Calgary.” (source)
Bear in mind this was just a little while after an awkward BNN interview where he admitted that he had never studied the Canadian housing market. (source)
I imagine Mr. Shiller thought his call for a housing bust was in the bag. After all, prices had been descending for over a year already.
Ironically, his call for a housing bust came just a few months before the market bottomed out in Calgary and Canada as a whole.
Fast forward to 2012. In the 4 years since his initial call for a Canadian housing bust, Mr. Shiller presumably studied our market a little more thoroughly.
“I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S.,” he said in September of last year.
The data coming out from Canadian real estate boards at that time wasn’t looking good. Prices were falling, sales were plunging. The media picked up his quote and it spread like wildfire. The doomers could taste blood. Just wait until spring ’13.
Spring turned into summer and bloodlust turned into disbelief as the market took off once again.
Mr. Shiller’s initial call for a crash marked the beginning of price appreciation that has lasted nearly 5 years.
A housing correction is a possibility in any market. The trick is getting the timing right, something Mr. Shiller failed to do for the Canadian market.