Can you imagine the hardship implied by another 10% to 25% drop in housing prices? Our nation's leading expert in housing prices, Robert Schiller can. Heard making the remarks in an open microphone at a conference earlier this year, he is not backing off his remarks. And, he just repeated this warning at a conference on Thursday. Les Christie, reports in CNN Money, on June 9, that
Housing guru Robert Shiller sees more pain ahead. In a market where so much depends on perceptions, many are increasingly worried. The stock market has also been trending down for over a month, giving rise to fears we are heading into a double dipper-downturn.
... economist and housing market guru Robert Shiller opined earlier this year that he would not be shocked if there was another 10% to 25% in the nation's home price plunge. ... At a S&P Housing Summit in New York, Shiller on Thursday reiterated his fears of falling home prices.
"I worry that this is a real and continuing downturn, like in Japan," Shiller said. "It had a boom in the 1980s that peaked in 1991. Prices declined in the major cities for 15 straight years after that."
The U.S. housing market is hard to predict because the boom and bust it went through was unique. Shiller has studied historical price data back to the 1890s and found nothing like it.
Having another 15 years of price declines may sound gruesome but it would not be unprecedented for a bubble of this magnitude. But, the side-effects on the rest of the economy could be severe, as homeowners are trapped in homes they can not sell, because they owe more on their mortgages than their homes are worth. Then they can not move to accept better jobs, and foreclosures create a viscous cycles on further price declines, and possibly also bank failures.
"This is the biggest housing boom and bust in U.S. history," he said. ...
It's even different from the Great Depression, when the home price plunge was at about the same rate. The big difference, however, was that prices of nearly everything else cratered in the 1930s as well -- which has not been true during the housing bust.
I'll try to find the normalized 100 year history of Housing prices which essentially suggests the same thing. I feel very sad for young people like my son trying to start their adult lives in such tough times as this. Meanwhile, China and India are experience strong growth in the GDPs.
Do you get the creepy feeling that the winds of change are blowing in the wrong direction for us now? We may have to smarten up and start acting less crazy in politics and public policy. We cold afford to be stupid in the past. But, not anymore.
11:49 AM PT: Here is a normalized plot of housing prices for over 100 years. Notice that we still have a ways to go just to get back to the average. However, in most boom-bust cycles like this, prices "overcorrect, as you can see they did in the Great Depression of the 1930s.
If this were to occur, we might expect an additional 20% to 25% beyond the 10% to 25% to go. Taking us into another Great Depression kind of scenario for several more decades. This would be extra bad, and no one prominent is predicting this publicly, at this point.