Coruscation

YALE ECONOMIST ROBERT SHILLER delivers his forecast for U.S. housing with a scholarly diffidence that only slightly mutes his stark message: The market is in the throes of a bubble of unprecedented proportions that probably will end ugly.

Such unsettling talk is cheap, of course, especially from a tenured academic, and many sources, including Barron's, have wrongly predicted housing's downfall several times in the past few years. But the Ivy League professor's forecasts of coming trouble have been right before. His best seller Irrational Exuberance, predicting a bear market in U.S. stocks, hit the bookstores in March 2000, less than a week before the Nasdaq began a dizzying descent from above 5000 that would destroy 75% of its value in a little over 2½ years.

In the real-estate market, Shiller contends, a price slide could begin at any time with the crescendo of what he describes simply as "talk" -- a word that he uses to cover everything from the recent Time magazine cover story on the vertiginous rise in home prices and the popularity of cable-television shows about rehabilitating and investing in real estate to the breathless newspaper stories of Miami condos being "flipped" for profit a half-dozen times before construction even begins.