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Leading Expert Says Fears of Getting Priced Out of Housing Market "Exaggerated"—Except in San Francisco and Portland

Nobel prize-winning economist says Portland's market is different.

There may be no greater expert on U.S. housing prices than Yale economics professor Robert Shiller, who created a widely-cited housing price index in 1991 and won a Nobel Prize in 2013.

And the news Shiller has for aspiring Portland homeowners isn't good.

Shiller writes a regular column for the Sunday New York Times business section and this week, he addressed a common fear in the current economic boom—housing prices that are rising so rapidly many Americans fear they'll never be able to afford to buy a home.

Shiller says that his research shows such fears are generally overblown because in the long run, housing prices haven't sustained the kind of strength they've exhibited recently.

"As I have calculated, home prices corrected for Consumer Price Index inflation nationally were nearly flat for the century ending in 1990," Shiller wrote in yesterday's Times. "And when nominal home prices are deflated by per capita disposable personal income, it turns out that real prices of existing homes fell 12 percent while real prices of newly built homes fell 30 percent from 1975 to 2015."

Translation: even if it looks like home prices only go up, there will be dips and periods in which housing prices stay flat—although Shiller's data shows a couple of exceptions.

"There is reason to believe that double-digit increases won't continue for long in individual cities," Shiller writes. "Short-term variations abound, but for the most part, the differences in long-term home price increases in individual cities are about plus or minus one percentage point annually. (Exceptions include San Francisco and Portland, whose home prices have grown almost two percentage points above average annually since 1987.)"

Translation: If you are renting in Portland, it might be time to start pricing homes in Eugene or Spokane, because demographers say Portland's population increase—a primary driver of housing prices—will continue.