Are you irrationally exuberant? - Jul. 27, 2004
I would say a bubble is happening," said Robert Shiller, whose book "Irrational Exuberance" (Princeton University Press, 2000) warned, correctly, that the stock market was grossly overvalued by investors' unfounded optimism.

"When it's going to burst is the real question," he said. "It's difficult [to know]."

The Yale economist and principal at real estate firm Fiserv Case Shiller Weiss is now working on the book's second edition, which will among other things look at whether America's obsession with the stock market has been displaced by exuberance for real estate.

During a housing bubble, he said, buyers who would otherwise consider a house too expensive go ahead and buy anyway because they overestimate future price appreciation and underestimate risk. The bubble bursts, or deflates, when buyers are no longer so sure that prices will continue to increase.


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Read it all and see if you agree with Schiller. I think he may be wrong about this. I can see problems happening in California, where the prices are ridiculously inflated, but not in the South and Midwest. I think that certainly prices here (the Chicago area) reflect rational market forces.