Housing bottom not imminent - worst of price declines yet to come

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NEW YORK (Reuters) - The U.S. housing market's skid is nowhere near over and could extend for another five or even 10 years, according to one of the most-watched housing economists.

Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, told Reuters that declines in home values in the most vulnerable markets could well double the losses recorded thus far.

What's more, Shiller, who is also co-founder and chief economist of the financial firm MacroMarkets LLC, said predictions for a bottom within the next year or so are probably wrong, with price declines in 2008 possibly worse than those seen this year.

"There is a probability of a continuing decline for a period of years, bringing prices in many cities down in the 10s of percent," Shiller said in an exclusive interview.

"The bottom is hard to predict," he said. "I do not see it imminent and it could be five or 10 years too."

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Areas most vulnerable to home depreciation are those that rose the most during the market's heyday, plus those at the center of the crisis in the subprime mortgage market, Shiller said. California and Florida are high on this list.

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Many economists say lower real estate prices will bring buyers back to the housing market next year and they are predicting a rebound in home sales by the middle of 2008.

"They could be right, but I am thinking there is a good chance they are wrong," he said.

http://www.reuters.com/article/ousiv/idUSN...0071112?sp=true

[LaL 418]

I don't know if I buy the 10 year decline, but anything is possible - that that sure is a scary chance. I wish we could ride this out, but for us, it just isn't going to happen.

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I don't know if I buy the 10 year decline, but anything is possible - that that sure is a scary chance. I wish we could ride this out, but for us, it just isn't going to happen.

The last bust (88-98) in the NJ area had 2-3 years of nominal price declines followed by 7-8 years of sub-inflation appreciation (i.e. real price declines).

[Otto 83]

A lot of this is market correction - some of it a long-time-coming (aka California) - sub-prime plays a role, but it will sort itself out eventually (probably with some stricter restrictions on how much home a buyer can purchase)...

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probably with some stricter restrictions on how much home a buyer can purchase)...

Only for a while. Say bye-bye to any new restrictions during the next boom.

Anyone wonder why free markets spend so much damn time "correcting"? Because they keep making mistakes. They overshoot going up and they will overshoot going down.

[russ 1]

Anyone wonder why free markets spend so much damn time "correcting"? Because they keep making mistakes. They overshoot going up and they will overshoot going down.

I blame "Irrational Exuberance"

[LaL 418]

Anyone wonder why free markets spend so much damn time "correcting"? Because they keep making mistakes. They overshoot going up and they will overshoot going down.

I blame "Irrational Exuberance"

lol good term.

/sigh