April 22, 2008
Housing slump may reach epic proportions
This guy admits to being chronically bearish, but it's hard to consider the possibilities brought up in this Associated Press story moving today:
An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression, and bailouts will be needed so millions don’t lose their homes. Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor’s/Case-Shiller home price index, said there’s a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.
To see how prices could have fallen so far, so fast, consider this from the same article:
Home prices rose about 85 percent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Shiller said. “Basically we’re in uncharted territory,” Shiller said. “It seems we have developed a speculative culture about housing that never existed on a national basis before.”
I promise I report good news too. Let me know if you see any.
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