Yale economist Robert Shiller, who predicted the 2000 stock market crash and the current real estate crash has news for Manhattan: You're not immune. In a lengthy Observer interview, the professor scoffs at the idea that, while the rest of the country implodes, Manhattan real estate will just keep jumping 10% a year. Shiller likens the city to ancient Rome before the fall and says the crash is only a matter of time. Excerpt below:You’ve been warning of a national real estate collapse since 2005. Do you feel vindicated?
Mr. Shiller: Well, I don’t like to use the word vindicated, but it is unraveling as more or less I expected.
The sub-prime mortgage scandal hasn’t much affected Manhattan. Are we immune?
Firstly, you’re definitely not immune, OK? Manhattan is a unique place, and that does mean that it has different dynamics, but it’s not immune, I can guarantee you that … If it gets too expensive in New York, people will leave it, no matter what—they can’t afford to live there. And so it’s just not true that New York will keep appreciating independently of everywhere else, I just don’t believe it. Elementary economics say people will always substitute away when the price gets too high, and so they’re doing that.