An overview of the ideas, methods, and institutions that permit human society to manage risks and foster enterprise. Emphasis on financially-savvy leadership skills. Description of practices today and analysis of prospects for the future. Introduction to risk management and behavioral finance principles to understand the real-world functioning of securities, insurance, and banking industries. The ultimate goal of this course is using such industries effectively and towards a better society.
The Bubble, part 3
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來自 Yale University 的課程
Financial Markets
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從本節課中
Module 4
Take a look into the recent past, exploring recessions, bubbles, the mortgage crisis, and regulation.
與講師見面
Robert ShillerSterling Professor of Economics at Yale University
Economics
Now, one thing that happened,
just to try to put it in your mind clearly why we had a housing bubble.
I also ask in my questionnaire your expected ten-year home price appreciation.
What do you think houses in your area will do on average
in terms of price increase per year for the next ten years?
And so we found that the average, this is actually a trimmed mean,
essentially the average response was 12% a year for
the next 10 years in 2004.
That's what people expected in the United States.
That's a pretty high appreciation,
given also that they were at almost record high levels in 2004.
So what did people think?
12% a year, that would double in just like six years.
But they're already high.
Did they really think that?
I don't know if they knew what they were saying, but let's just take it.
They thought 12% a year.
What could you borrow on a mortgage for it, with a 30-year mortgage rate with 6%?
So does this look like a good deal?
You buy a house, you invest, you only put down 5% of the money or less.
And you've leveraged 20 to 1.
And you have a six percentage point spread between the interest rate you pay and
the appreciation you get.
Also, the interest is tax deductible and the appreciation is a capital gains.
And you have deferred taxes on that or maybe never have to pay taxes on it.
Pretty good deal, right?
There's a six percentage point spread.
Roughly speaking, you'll average 20 to 1.
What rate am I getting for a year?
Sounds like 120%.
I didn't do that carefully.
It was a, you'd be stupid not to buy a house, everybody thought that.
You've got to get into this market.
And there weren't enough people saying, hey,
wait a minute, [LAUGH] maybe this is a bubble.
Nobody used the word bubble yet.
The term housing bubble, I searched for it in engrams or in newspaper.
It was used rarely, not common.
The word bubble was something you were trained not to use in college when you
took your financial markets course.
You were told markets are efficient.
Maybe they were starting to doubt it after the stock market correction of 2000 but
it still hadn't reached most people.
So, that spread looked pretty good.
So what happened?
My data back then end I guess in 2012.
The spread is gone.
People don't expect to make more than they're paying on their mortgage.
Even though the fed has cut interest rates and mortgage rates have gone down,
they haven't gone down as fast as expectations have.
So lots of people are thinking, I don't need to own a house.
I'll live in an apartment, that's fine.
It's carefree, I don't have to mow the lawn or worry about anything.
And young people are more urban-oriented.
You live in a city where apartment living is more acceptable.
Anyway, why did this turning point happen?
Why did everyone seem to believe this, and then suddenly not?
Well, actually, we usually date the financial crisis as showing
it's first fault signs in 2007 but I would date it back to 2005.
And it seemed that I could see something in the air in 2005.
Not in the air, in the media, that public attitudes were changing.
So The Economist magazine, which is British, similar things were happening
in Britain, wrote a cover story in June 16,
2005 which showed house prices falling like a brick.
And nowhere were they actually falling.
This was The Economist getting out ahead of it to be congratulated for
writing this story, because they in a sense predicted the crisis.
And this is a line from that story, perhaps the best evidence that America's
house prices have reached dangerous levels is the fact that house-buying mania
has been plastered on the front of virtually every American newspaper and
magazine over the past month.
They noticed, they read all the newspapers, and
they noticed suddenly everyone's talking about crazed homebuyers.
Suddenly, it began to look embarrassing.
It used to be, it's obvious, you can get this huge
advantage by buying a house because home price is always go up.
But now, there's all these stories saying I'm stupid you have brought the house,
that suddenly clarifies people thinking.
It wasn't just The Economist.
Here's Time magazine.
This was three days apart.
They came out with their cover story, Home Sweet Home,
Why We're Going Gaga Over Real Estate.
Will your house make you rich?
Super hot markets, is it time to buy or sell?
The case for renting, wow!
This was a major magazine practically telling you
right on the cover that it's crazy.
And then I have one more slide.
I was interviewed by Barron's Magazine.
I think this was a cover story, I'm not sure that I remember right.
I was interviewed by Barron's, because they knew that I'd just come out
with my second edition for Irrational Exuberance and John Laing interviewed me.
That's me standing out in my own neighborhood here in New Haven.
Buy a home next door and what it says at the top,
Economist Robert Shiller whose book predicting the stock market crash
arrived just before the NASDAQ began its sickening slide in 2000,
sees another bubble ready to burst.
Home prices, he contend, could fall as much as 50%, adjusted for inflation.
So I remember Laing called me up and
he said, I'm going to quote you that you think home prices would fall 50%.
Are you sure you want to say that?
He called me late at night and I was thinking, my God,
am I going to make a prediction like that?
So I had like 60 seconds to think about and I said, yeah, go with it.
Actually, I was wrong, it only felt something in the 40%.
[LAUGH] It wasn't quite 50%.
But it really gave me a sense of the turmoil that was developed.
That the public,
it tends to be kind of fetish to take on ideas that spread by word on mouth.
The idea that it's a terrific thing to do, buy a house.
It's been happening more recently in other countries like China,
where people think, wow, I should buy a house.
Even though home prices in China, at some points, reached very high levels.
It's just human nature, it's the same in every country.
There's the same vulnerability everywhere.
>> You're saying there will be a new bubble after the 2007 crash in
the housing markets, especially in some emerging markets like China.
>> So, yeah.
>> I notice other real estate markets has been recent booming in China,
especially in the metropolitan cities like Beijing, Shanghai and Shenzhen.
>> Yeah. >> And the housing market, housing values
in Guangzhou has grown 10% compared to last year and
amounted to $659 per square foot compared to the Manhattan's 1,495.
>> Yeah. >> But
I think the average salary is not the half of the Manhattan's.
>> Right. >> So what do you think about,
is there a new bubble?
>> Yeah, well, China,
there's various measures of valuation of real estate in China.
So one is price to income.
This has been remarked by many Chinese,
that they say, how does anyone afford this real estate?
[LAUGH] Because look at the average salary of someone working in one of
these major cities.
It's just the ratio of price to that is just beyond belief.
So how do they afford it?
Well, their parents are helping out.
They're borrowing what they can and
they think that it's all going to be worth it because they're going to keep going up.
So, there are other measures,
just the rate of appreciation has been high in China.
The total value of land in China is high relative to their GDP.
So there's a lot and price to rent is high.
When you move to Shanghai or Shenzen, you don't buy rent, [LAUGH] and
invest your money somewhere else maybe.
I shouldn't speak with utter confidence about China because I'm not an expert on,
I've never lived there.
But it does seem that China is a special case regarding real estate.
One of them is that it's still difficult for Chinese people to invest abroad.
There are limits on how much they can put abroad.
And so they're stuck in China.
Secondly, there's a fear of corruption in China, a fear of being taken advantage of.
And I know Xi Jinping is trying to combat corruption, but
I think there's still a public perception.
So they might tend to prefer investments in a house that they can see.
And there's also, people have pointed out in China,
to the relative shortage of females relative to males,
and many parents want their son, desperately, to get married.
So they save all their money and buy a house for
the son, so that he can impress a young woman that he has a house.
These are all kind of peculiarly Chinese factors that has been
driving home prices up there.
Now, the question is will they stay up there?
That's an interesting question.
It's always the long term comes in.
So will these factors continue?
Well, they might continue in the short run,
but my bet is that China is going to be on the path towards liberalizing,
so that Chinese people can invest abroad more.
I'm guessing, I'm not an expert on this.
And things will change.
Now the other thing about China is an interesting thing.
Its economic growth rate has been so high that you might
think that it's not going to be very long before Shenzhen,
Beijing ought to be the highest priced cities in the world.
But then, there's a slow down in China now.
Maybe, people won't feel quite so
optimistic that that's right around the corner.
So, there might be a slowdown now in Chinese real estate prices,
but these things are hard to predict.
