Robert Shiller on CNBC

Robert Shiller was interviewed in CNBC's Squawk Box this morning, and he gave a couple opinions that captured my attention.  Some of what he had to say seemed encouraging to the housing industry, and some was not quite so.  Following are a few perceptions I had of his interview:

Shiller said that he feels that mortgage interest deductibility encourages bigger houses, and he is not sure that is necessarily a positive result.  He suggested that perhaps the deductibility should be preserved only for low income buyers who can barely afford a new home.  I found that comment interesting because there are so few low income buyers of low priced homes who realize any tax benefit from itemizing deductions, with or without a home interest deduction.  Additionally, Professor Shiller may want to consider that the deductibility encourages big loans, not necessarily big homes.

When asked which was better, real estate investment or equity investment, Shiller went with stocks over real estate.  He cited long term trends to support his opinion.  He probably called that one correctly.  Not only is the return comparable or a bit better with the right mix of equities, but they are considerably more liquid as well.  He did say that it makes plenty sense to buy real estate as consumers who are investing in their future use and enjoyment of the property.

One other item Shiller touched on was the home buyer tax credits, which he characterized as useful in temporarily raising the price of homes during their run.  What was advertised as a great benefit to buyers was actually a greater benefit to sellers.  Of course, at the time of the credits, almost all sellers were banks.  Interesting.