Today’s Financial Times presents the following charts:
Yesterday, Yale’s Robert Shiller announced that home prices may fall more than 30% from their peak, a decline surpassing that seen during the great depression:
Yale University economist Robert Shiller, pioneer of Standard & Poor’s/Case-Shiller home-price index, said there’s a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.
“I think there is a scenario that they could be down substantially more,” Mr. Shiller said during a speech at the New Haven Lawn Club.
Mr. Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct. Home prices rose about 85% from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Mr. Shiller said. “Basically we’re in uncharted territory,” he said.
If Mr. Shiller is correct (and he has been one of the few prescient economists of the last decade) then it is hard to imagine the economy seeing anything but a prolonged downturn.
Mr. Shiller, you make kitty scared:
Road to ruin? America ponders the depth of its downturn
Yale’s Shiller: U.S. Housing Slump May Exceed Great Depression