Beware of mini-bubbles

Yale economist Robert Shiller sees unusual activity in both the housing and stock markets, putting the recovery at some risk. But he's stopping short of predicting an actual downturn. "I think it's more likely we don't do so well from here," he tells the Motley Fool.

Home prices have been going up for nearly a year now, according to our data, the S&P/Case-Shiller indices ... Normally we could extrapolate that kind of upward trend because historically home prices have shown a lot of momentum. But I think we're in a very unusual circumstance because of the massive bailouts, the homebuyer tax credits, the Fed's purchase of mortgage-backed securities -- and these things are coming to an end. So it's an unusual period. So I don't trust the trend that we have. I'm worried that it might get reversed.

[CUT]

It's hard to quote probability because people who do that rely on statistical analysis and past data ... If you just looked at the trend of home prices you might conclude the probability is very low. We're less than a year into this boom, and booms have lasted much longer than that. That's why it's very hard to compute probabilities. But I think that it doesn't look real. It doesn't look like this is really another boom like the one that we had in the 2000s.