Analyst Warns Home Prices Could Fall Much Further
A recent string of disappointing economic reports on housing and the job market have some analysts warning that we may be headed for a double-dip recession. One such analyst, Robert Shiller, told Reuters on Thursday that if unemployment continues to edge upward, it could fuel another recession on the heels of the nation's worst financial downturn since the Great Depression.
"Whether we call it a double-dip or not, I think there is a risk," Shiller said. He also commented on the recent double-dip in home prices in March, saying that it could be a seasonal anomaly from the extreme winter season we experienced or could prove to be the start of another freefall in property values. "My gut feeling is we might see a continuation of the decline (in home prices)," Shiller noted.
Falling short of forecasting a massive price drop, Shiller did say that a decline of 10 to 25 percent wouldn't surprise him. Shiller said the market is still inundated with a tremendous oversupply of unsold homes and with prices falling, the percentage of underwater homeowners, those who owe more on their loans than the home is worth, is likely to climb even higher. As for when the slide in home prices might come to an end, Shiller said it is possible that the decline won't end for 20 years.
"We've seen five years of decline already since the peak in 2006 and I don't see evidence that we're coming out of it," he explained. Having built a reputation for predicting bubbles on the stock market and in housing, Shiller is the co-founder of the S&P/Case-Shiller home prices index, which reported last week that single-family home prices fell in March to levels not seen since March 2003. That means prices have fallen to their lowest levels since the housing collapse began, fueling calls of double-dip from a number of analysts.
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