Yale economist and housing-bust-predictor Robert Shiller says that, while housing and stock prices could well go lower in the short term, now is a good time for investors to be in both equities and real estate.

“I’m less pessimistic than I was a few months ago,” Shiller told Bloomberg when asked about stocks. “The price-earnings ratio is about average, and by that you might say it sounds like one should be in the market and have a balanced portfolio that has a good share of stocks. … Having a good fraction of your portfolio in stocks, not zero, is probably sensible now. People should be in real estate as well because that has a chance of rebounding. It has to be about diversification, about spreading risks.”

Shiller says that the increase in pending home sales in March and the drop in the number of properties on the market in February were both positive signs for U.S. housing prices.

In the short term, Shiller says the outlook is “seriously cloudy”, according to Bloomberg. “The unemployment rate is probably going to go up substantially more,” he said. “We’re going to have more economic chaos, confidence will come back to a lower level again. It’s still a seriously cloudy picture and there’s substantial risk of further substantial home price and further stock price declines.”

“The big thing is that we don’t know,” Shiller added. “We could have a huge rally like the 1933 to 1937 rally. That happened in the middle of a depression so it could happen now.”

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