The World’s Priciest Stock Market

This site offers updated information relating to the book Irrational Exuberance by Robert J. Shiller. Available February from Princeton University Press or your local bookseller.

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ShillerPE for MSCI Europe 2015

Recent housing market forecasts for Las Vegas, Nevada suggest that home prices across the metro area could continue rising through , though at a slower pace than the last couple of years.

The prices peaked in the first quarter of , when the index kept by Shiller recorded a level of Shiller draws some key insights from his analysis of long term home prices in his book Irrational Exuberance.

Contrary to popular belief, there has been no continuous uptrend in home prices in the US and the home prices show a strong tendency to return to their level in real terms.

Moreover, he illustrates how the pattern of changes in home prices bear no relation to changes in construction costs, interest rates or population. Shiller notes that there is a strong perception across the globe that home prices are continuously increasing, and that this kind of sentiment and paradigm may be fueling bubbles in real estate markets.

He points to some psychological heuristics that may be responsible for creating this perception. He says that since homes are relatively infrequent purchases, people tend to remember the purchase price of a home from long ago and are surprised at the difference between then and now.

He also discusses how people consistently overestimate the appreciation in the value of their homes. The US Census, since , has asked home owners to estimate the value of their homes. Shiller also offers some explanations as to why a continuous uptrend is not observed in real home prices:.

Thus, real home prices are essentially trend-less and do not show any continuous uptrend or downtrend in the long-run. This is not limited to the US as it is also observed in the real home price indices of Netherlands and Norway. Shiller's key observation, as outlined in his book Irrational Exuberance , is that real home prices show a remarkable tendency to return to their level.

However, there have been some key periods where the prices have departed from this level. Shiller offers some explanations for these episodes in his book:.

National Home Price Index is a composite of single-family home price indices for the nine U. It is calculated monthly, using a three-month moving average. The index kept by Shiller available on his website at http: These indices are three-month moving averages. The composite and city indices are normalized to have a value of in January It is impossible to pin down the full cause of the high price of the US stock market.

That alone should remind all investors of the importance of diversification, and that the overall US stock market should not be given too much weight in a portfolio. And right now, the United States is leading the world. We can get a simple intuitive measure of the differences between countries by looking at price-earnings ratios. The CAPE ratio is the real inflation-adjusted price of a share divided by a ten-year average of real earnings per share.

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Please be civil and avoid name-calling and ad hominem remarks. Economists and housing analysts define a balanced housing market as having five to six months worth of supply. So the Las Vegas real estate scene is still fairly constrained, with available supply falling short of demand. Real estate market activity can also be measured by looking at the number of days a typical home stays on the market, before going under contract.

That was higher than the national average. Some of the hottest markets in the country, like Seattle, Washington and Portland, Oregon, had a median DOM of less than 15 days during the same month.

So perhaps the Las Vegas real estate market is slowing down a bit, despite the tight inventory conditions across the metro area. The bottom line to all of this is that home prices in and around the city will most likely continue to rise over the coming months.

All of the real estate market forecasts for Las Vegas that we have studied seem to agree that house values will continue rising year over year.