Robert Shiller: "Economy Is At A Tipping Point... A 10-25% Slump In Home Prices Would Not Surprise Me At All"

Tyler Durden's picture

The latest soundbite that should certainly add a few extra points to the
S&P now that trading has reverted back to the bizarro zone is the
most recent warning from Robert "Case-Shiller" Shiller who said that
another 10-25% drop in real home prices would not surprise him at all...
or anyone else for that matter except for all those who saw the "official" housing bottom back in 2009.

From Reuters:

Recent housing and employment data suggests the economy is at a tipping point, while home prices could have much further to fall, veteran economist Robert Shiller said on Thursday.

"My gut feeling is we might see a continuation of the decline (in home prices)," Shiller said.

He added that a 10 to 25 percent slump in real home prices "wouldn't surprise me at all," though he cautioned that was not a forecast.

Speaking at the Standard & Poor's housing summit, Shiller said recent data showing U.S. home prices fell into a double dip in March could prove to be either a seasonal effect over the winter months or part of a downward trend.

Another uptick in the unemployment rate might also start to point to a double-dip recession, he said.

Shiller is the co-founder of the S&P/Case-Shiller home price index and is known for warning about bubbles in the stock market and housing market.

Can the Fed already announce it will buy up every single home in the US at cost already, and get it over with. This aggression against kicking the can down the road will not stand.

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snowball777's picture

I just signed a rental lease that says he's right.

Jimbo Jones's picture

+1, Me too but still looking for some land to farm.

bankrupt JPM buy silver's picture

Reset the system already this is getting dumb.

 

www.silvergoldsilver.blogspot.com

NotApplicable's picture

Problem is, a reset is a massive wealth transfer event. Worse yet, the RMBS scams have placed the RE wealth into the Bizarro World where no one rightfully owns it. How can that be sorted out without some entity getting title (or a lien on one) to property they do not own? IMO, it can't. Which is exactly why we've ended up here. Somebody is going to be able to control nearly all of the RE in the US, like say someone named Timmah, or The Bernank.

A reset only plays into their hands, as it is the asset transfer end game.

MachoMan's picture

Title is not an issue, outstanding liens are an issue...  but, so long as the lienholders of record release, then you can probably rest soundly...  the odds of a scandinavian municipality coming into BFE and winning a case alleging they have a rightful lien on your property after you paid it off are slim and none.  They'll be inclined to go for the low hanging fruit and attack the assholes that sold them worthless financial products.  Otherwise, they'll be playing an all or nothing game for depreciated (depreciating) real estate, likely in a court of equity, after having: (a) never notified the homeowner of their lien; and (b) sitting on their hands for too long after properties exchanged hands.  Simply put, in some hypertechnical legal sense, there may be a big issue, but practically speaking, I don't put much faith in it.

[now, foreclosing on a property without standing is a whole other ballgame].

Hearst's picture

I would say a reset wont work.  This system needs to be booted down and put to the curb.  Meaning a new monetary operating system must be brought forward not loaded down and based upon debt issuance.  No one wants to be responsible for the unplugging and crash of the system.  Most central econcomic planners would prefer the Ctrl Alt Delete approach which buys temporary relief but never addresses the internal virus.

svendthrift's picture

Something along the lines of a social credit system as used by Zeee Germans (at least it worked, right) before the big blow up over there?

Hearst's picture

I would think that since we are living in Crony Capitalism where the rich are bailed out at the expence of everyone else, laws ought to be enacted to tax all bank's profits by 90% once a set profit level has been breached.  

 

While a capitalist at heart, these are not ordinary 'free market' times.  Banks should be forced to go back to 'banker hours' where their primary (and perhaps sole) responsibility is to secure deposits and facilitate the day to day needs of communities.

 

This will be viewed as draconian and anti-free market at first.  But necessary in order to 'kill the bank' as Andrew Jackson knew must be done.

 

"It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes.  Distinctions in society will always exist under every just government.  Equality of talents, of education, or of wealth can not be produced by human institutions.  In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law, but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuties, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society - the farmer, mechanics, and laborers who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government.  There are no necessary evils in government.  Its evils exist only in its abuses.  If it would confine itself to equal protections, and, as Heaven does its rains, shower its favors alike on the high and low, the rich and the poor, it would be an unqualified blessing.  In the act before me there seems to be a wide and unnecessary departure from these just principles"

 

Andrew Jackson defending his position in congress to kill the Second Bank Of The United States even though the congress and supreme court had ruled it constitutional. 

HelluvaEngineer's picture

The system won't clear until the banks are forced to dump at true market value.  I suspect there is more demand at that price point than anyone expects.  That should clear the market in a few months, and then home price appreciation might take place.

FEDbuster's picture

This article validates the great article by Charles Hugh Smith from three months ago titled, "Phase Shift: The Next Leg Down in House Prices"

http://www.oftwominds.com/blogmar11/phase-shift-housing3-11.html

The final leg down will bring housing prices back to 1987 nominal levels (paid for in worth less 2014 Bennie Bucks).

 

tony bonn's picture

where is cramer when you need him to make another assinine comment about the end of the real estate slump??

writingsonthewall's picture

Cramer's still advising people to 'Buy Bear Stearns' - he also fancies Lehmans as their balance sheet looks strong and they are 'undervalued'

TideFighter's picture

screw the G/S ratio.

1 GAE = 1 House

MarketTruth's picture

In Detroit 1 GAE = about 100 homes (not a typo).

Troll Magnet's picture

What is GAE?  Gold American Eagle?

DaddyO's picture

 

Gold American Eagle?

DaddyO

edit:You must have hit the edit button before I posted.

Troll Magnet's picture

I did.  Hyperbolic comments such as 1 GAE = 1 house (or 100 houses in Detroit) threw me off.

I mean, come on. 

DaddyO's picture

 

Yeah, in my market(FLA) the cheapest I have seen the REO's going for is about $8000 for a crack house in the hood. the average foreclosure is selling for around $40,000 in an older working class neighborhood.

DaddyO

tarsubil's picture

Detroit has gone hyperbolic.

DaddyO's picture

 

As a Mortgage Field Services Contractor who services FannieMae, Freddie Mac and all the major banks, I can tell you things are getting worse by the week. Inventories are rising, sales are stalling and the financial future looks as if it is ready to explode.

If you are not into prepping for the future, you should be, as it appears that a meltdown is imminent and it is rapidly approaching.

DaddyO

j0nx's picture

Yeah Yeah if I had a dollar for every time I have heard that. 3+ years now the meltdown is right around the corner...

The meltdown either needs to shit or get off the pot because I am sick of living in limbo.

DaddyO's picture

 

Have you ever noticed an approaching storm becomes visible long before you start to feel any effects. The residents of Joplin, Mo could see the storm approaching long before any damage began to occur. What we are seeing played out in the economy is an approaching storm and we are now beginning to feel the blowing winds. The hail and rain are soon to follow.

DaddyO

kito's picture

Or we will continue to have stagnant growth, with some ups and downs and nothing more......

RockyRacoon's picture

Or we could be hit by an asteroid and all life would be extinguished.

All contingencies cannot be planned for.

Stride the earth as if you would live a thousand years; take each step as if you would die tomorrow.

Fukushima Sam's picture

OR we could have a nuclear reactor domino meltdown effect across the entire country of Japan.

Oh wait, that is already happening... unless they get them all shut off in time...

http://www.omantribune.com/index.php?page=news&id=93501&heading=Asia

NotApplicable's picture

God bless the contradiction known as stagnant growth!

Why without it, we'd have no growth at all.

lilmac929's picture

Ha!  I love blind optimism! 

 

girl money's picture

Funny you mention Joplin.  Its destruction was predicted about 40 hours before it happened by a guy who watches radar anomalies on YouTube... Dutchsinse. 

If there is anything to his research, then why buy a house when it can be HAARP'ed off the face of the earth by someone manipulating the weather?

Maybe there's nothing to it... but if there is, and it's either our own dear government, or some other country that cannot be stopped by our government, then there really is no reason to chase after that particular American Dream.

Strange times.  Glad there's ZH, my little slice of sanity and healthy debate.

 

 

Founders Keeper's picture

[Yeah Yeah if I had a dollar for every time I have heard that. 3+ years now the meltdown is right around the corner...]---j0nx

Hi j0nx.

The stock market crash that kicked off the Great Depression happened in the Fall of 1929.

The first "Hooverville" shanties (Seattle) did not appear until 1931.

History does not unfold as fast as a Hollywood movie.

 

NotApplicable's picture

With the exception of 9/11. That day looked just like Hollywood's finest.

j0nx's picture

Thanks, I'm aware of history. My beef is with people claiming the meltdown is soon upon us when in reality they have no F'ng clue when or IF it will even come. When it does come it will be swift and brutal but whether that day is tomorrow, 10 years from now or never is the issue at hand here.

DaddyO's picture

 

I made no claims as to the tiiming of any meltdown! My point was that the storm clouds on the horizon are beginning to appear more ominous with every passing day. Being up to my arse in the foreclosure mess and being an ardent observer of the machinations of the FED and the .gov, my gut is telling me that TPTB haven't got a f***ing clue. You're right when it finally hits the tipping point and the flag goes up, all hell will break loose. Until then it will feel like a slow slide into oblivion.

DaddyO

RockyRacoon's picture

Thanks for the update.  Keep posting with the real estate outlook.  I have a broker's license in my state, but don't actively participate in the real estate scene any more.   My specialty was property management, but I'm too old for that 24/7 world any more.  A boots-on-the-ground input is appreciated.   (Yeah, I hate that term as well.)

Inspector Bird's picture

The stock market crash didn't kick off anything.  The Depression had begun months before.  The crash was a symptom of a larger problem that was finally felt on Wall Street.  We use it as the "starting point" because the people who eventually "made" the history felt it was the cause, without spending much time reviewing what was preceding that singular event.

 

As for the upcoming "crash", I don't believe things have ever recovered - let alone that we're in a "double dip".  We've been inching downward, and using sand to soften each step.  But the current of debt is washing away that sand every day.  So the Fed creates more.  Ever watch a kid try to hold back the tide by building a sandwall?  Same thing.

Why, when all this first started, did we have people telling us it was caused by excessive debt, but those same people created cash injections for banks to lend more?  Why do we have a president telling us we have too much debt, but he was all hyped to create more to "fix" things?

 

There was a time when the government response to an economic crash was to let it happen - in fact, sometimes make it worse so that it was deeper but shorter.  Today, the attempt is to drag it out as long as possible and make it almost unnoticeable SOMEHOW.  So they issue their "research" that inflation is non-existent (they don't buy food or gas, so why should they care), that sales are up (sure, you're paying more for less), the economy is "growing" (because the government is hiring short term workers to pave roads and collect census data). 

We are tired of the game. 

writingsonthewall's picture

Sorry - but after a 20 year boom did you think the crash would be over in a week or two?

 

You really must stop watching MTV so much - life isn't like that.

It took 10 years to clear the great depression - I expect this crisis will rumble along for longer, maybe 15 years - going by the size of the collapse relative to 1930.

The dragging out is also because central banks don't want to wake up and smell the coffee - preferring to stall and stall and stall - until they have no options left.

 

Don't worry - by the end of 2011 things will be very different in the world.

FlyPaper's picture

How about:  The housing market is in the process of "MELTING DOWN" - and its a process and not a single event?  

 

Boston's picture

Bullish!  ....for Treasuries.

Ruffcut's picture

If they only let lose of the hidden inventory, but the need to report losses, would be bad. But the fasbastards would allow more accounting adjustments.

Re-Discovery's picture

There are no (natural) supports for the housing markets.  Absolutely none.  Rates heading  up (cant go down.)  Consumers over-leveraged.  Banks tight as a frog's *****.  Huge inventories.  Of course no one on wall street sees this as NYC is 1% vacancy.

 

 

 

 

 

Dr. No's picture

Reduction in home prices are good.  Everyone is happy when ipads get cheaper.  Rejoice that houses are getting cheaper too.

MachoMan's picture

It's good as long as wages remain stagnant...  but presumes that asset depreciation will outpace wage decreases...  something I am not certain is a foregone conclusion...

Dr. No's picture

I agree with you, but since wages are stagnant now (as well as decreasing), we may as well have declining home prices to go with it. It would be worse with stagnant wages AND stagnant housing.

NotApplicable's picture

No, it's always good, as it is the market trying to correct itself by pricing at a level where inventory clears. While I agree that wages are part of the calculation (as you have to be able to enter the market for it to start clearing), the underlying problem is one of an over-supply engineered by the disastrous duo of Wall St. and Fannie/Freddie's Great Derivatives Adventure.

It's just another classic example of Austrian Business Cycle Theory, where unbridlded credit flows into one malinvestment after another, believing the demand is real and sustainable. Because, hey, it's making me money today. In the meantime, empty houses and half-built subdivisions decay in place with no real demand other than speculative.

MachoMan's picture

I agree.  Good from the perspective of a prospective home buyer...  although, price declines should necessitate cheaper rent...  eventually...  nonetheless, an absolute necessity to move forward.

Somehow, despite its laughable failures, I suspect keynesianism will be wrapped in copious amounts of protection, shelved, and picked back up on a rainy day in a couple generations... 

NotApplicable's picture

They'll do it for the children.

MachoMan's picture

Much like a catholic priest

Inspector Bird's picture

In the long run (and we should all take the longer view), this is going to be good.  It has to be.  We have to let markets clear.  Debt destruction is the ONLY way to make things improve.

It would've been better to let Wall Street and the banks take it on the chin.  Inflating their way out, so they don't suffer visible losses, is the crony capitalist solution.  It will take time. 

 

I repeat my 2006 story of "buy in Florida".  Went to look at the condo complex.  Beautiful.  Nice condos.  Empty parking lots.  100% sold out.  I looked at the guy and said "I'm not buying - who would?"  He says "why?  It's highly desirable - 100% sold!".  "Nobody is living here, there is nobody in the parking lots.  It's a speculative flip game." 

Bye bye.  It was easy to see for a normal person.  But not for someone who bought into the lie.

Where does this leave us though?  What do you do next?  I'd say raise interest rates and force people out.  Clear the markets.  Painful, social unrest, etc.  Sure.  But it has to be done.

Silver Dreamer's picture

Rejoicing is reserved for those who do not already own and that have the 20-30% to buy however.  How does it help someone to see their mortgage stay at 384K for a house that is now worth 138K?