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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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Thu, 06/09/2011 - 10:19 | 1354280 snowball777
snowball777's picture

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

Thu, 06/09/2011 - 12:52 | 1354837 Jimbo Jones
Jimbo Jones's picture

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

Thu, 06/09/2011 - 10:24 | 1354282 bankrupt JPM bu...
bankrupt JPM buy silver's picture

Reset the system already this is getting dumb.

Thu, 06/09/2011 - 10:45 | 1354374 NotApplicable
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.

Thu, 06/09/2011 - 11:40 | 1354584 MachoMan
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].

Thu, 06/09/2011 - 10:54 | 1354389 Hearst
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.

Thu, 06/09/2011 - 11:02 | 1354441 svendthrift
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?

Thu, 06/09/2011 - 11:54 | 1354625 Hearst
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. 

Thu, 06/09/2011 - 10:52 | 1354401 HelluvaEngineer
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.

Thu, 06/09/2011 - 11:19 | 1354484 FEDbuster
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"

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


Thu, 06/09/2011 - 10:25 | 1354288 tony bonn
tony bonn's picture

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

Thu, 06/09/2011 - 10:54 | 1354395 writingsonthewall
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'

Thu, 06/09/2011 - 10:22 | 1354289 TideFighter
TideFighter's picture

screw the G/S ratio.

1 GAE = 1 House

Thu, 06/09/2011 - 10:34 | 1354329 MarketTruth
MarketTruth's picture

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

Thu, 06/09/2011 - 10:44 | 1354354 Troll Magnet
Troll Magnet's picture

What is GAE?  Gold American Eagle?

Thu, 06/09/2011 - 10:46 | 1354363 DaddyO
DaddyO's picture


Gold American Eagle?


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

Thu, 06/09/2011 - 10:54 | 1354398 Troll Magnet
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. 

Thu, 06/09/2011 - 10:57 | 1354424 DaddyO
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.


Thu, 06/09/2011 - 12:53 | 1354842 mick_richfield
Thu, 06/09/2011 - 15:25 | 1355386 tarsubil
tarsubil's picture

Detroit has gone hyperbolic.

Thu, 06/09/2011 - 11:20 | 1354491 bonddude
bonddude's picture

Good price for firewood.

Thu, 06/09/2011 - 10:27 | 1354294 DaddyO
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.


Thu, 06/09/2011 - 10:31 | 1354322 j0nx
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.

Thu, 06/09/2011 - 10:38 | 1354347 DaddyO
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.


Thu, 06/09/2011 - 10:50 | 1354393 kito
kito's picture

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

Thu, 06/09/2011 - 11:19 | 1354488 RockyRacoon
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.

Thu, 06/09/2011 - 12:47 | 1354816 Fukushima Sam
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...

Thu, 06/09/2011 - 11:29 | 1354525 NotApplicable
NotApplicable's picture

God bless the contradiction known as stagnant growth!

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

Thu, 06/09/2011 - 12:13 | 1354712 lilmac929
lilmac929's picture

Ha!  I love blind optimism! 


Thu, 06/09/2011 - 17:35 | 1355878 girl money
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.



Thu, 06/09/2011 - 10:43 | 1354369 Founders Keeper
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.


Thu, 06/09/2011 - 10:47 | 1354382 NotApplicable
NotApplicable's picture

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

Thu, 06/09/2011 - 11:00 | 1354436 j0nx
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.

Thu, 06/09/2011 - 11:07 | 1354464 DaddyO
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.


Thu, 06/09/2011 - 11:20 | 1354501 RockyRacoon
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.)

Thu, 06/09/2011 - 12:52 | 1354850 Inspector Bird
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. 

Thu, 06/09/2011 - 10:53 | 1354409 writingsonthewall
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.

Thu, 06/09/2011 - 20:42 | 1356511 FlyPaper
FlyPaper's picture

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


Thu, 06/09/2011 - 11:02 | 1354431 Boston
Boston's picture

Bullish!  ....for Treasuries.

Thu, 06/09/2011 - 10:27 | 1354295 Ruffcut
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.

Thu, 06/09/2011 - 10:24 | 1354296 Re-Discovery
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.






Thu, 06/09/2011 - 10:26 | 1354300 Dr. No
Dr. No's picture

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

Thu, 06/09/2011 - 10:36 | 1354326 MachoMan
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...

Thu, 06/09/2011 - 10:46 | 1354377 Dr. No
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.

Thu, 06/09/2011 - 11:02 | 1354432 NotApplicable
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.

Thu, 06/09/2011 - 11:16 | 1354479 MachoMan
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... 

Thu, 06/09/2011 - 11:46 | 1354592 NotApplicable
NotApplicable's picture

They'll do it for the children.

Thu, 06/09/2011 - 13:00 | 1354875 MachoMan
MachoMan's picture

Much like a catholic priest

Thu, 06/09/2011 - 13:01 | 1354870 Inspector Bird
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.

Thu, 06/09/2011 - 11:06 | 1354454 Silver Dreamer
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?

Thu, 06/09/2011 - 11:37 | 1354564 Dr. No
Dr. No's picture

That is a bad situation, but pumping houses back up to $384k wont help and it wont happen.  If the quality of the living space is worth the monthly payment, stay.  If the space is not worth the payment, make plans to leave.  I have read stories of people who are "stuck" and it breaks my heart, but continuting to hope for a pump-up in prices is wasted time.  I think we need to move away from the 30-year mortgage model and declining home prices help this movement.

Thu, 06/09/2011 - 11:47 | 1354612 WallStreetClass...'s picture

right on

Thu, 06/09/2011 - 15:36 | 1355422 tarsubil
tarsubil's picture

I take solace in the fact that you couldn't build my house for what it is now priced at and the fact that we used to be paying more in rent for a highrise apartment that was 1/4 the sq footage. So, I'm not so much paying a mortgage as paying rent in a 25 year lease agreement. LOL.

Thu, 06/09/2011 - 11:47 | 1354611 MachoMan
MachoMan's picture

It helps by making their decision to file for bankruptcy easier!

Thu, 06/09/2011 - 10:27 | 1354302 John McCloy
John McCloy's picture

And the latest WTF moment you can't make this shit up is brought you by our President of the United States. This is what he said at a financial summit yesterday. 

“Save a little bit out of whatever you’re earning, and the magic of compound interest applies,” Obama said. “That is something that Michelle and I have tried to apply, not always successfully.”

   And this person is leading our nation talking up savings while Ben is Zirping it up for the last 2+ years.

Thu, 06/09/2011 - 10:38 | 1354311 Dr. No
Dr. No's picture

I laughed at that too.  A quick rule of 72 on .1% savings rate is 720 years to double your money.

EDIT: Dear Mr. Prez, do not feel bad you were not alway successful.  At .1%, Joe sixpack will ALWAYS be not successful.

Thu, 06/09/2011 - 15:14 | 1355346 Saxxon
Saxxon's picture

As if he's talking to a bunch of goddamned cub scouts with piggy banks in their laps.  Does he think Americans are that stupid?  Or just his constituency...

Thu, 06/09/2011 - 10:39 | 1354336 j0nx
j0nx's picture

Doesn't matter as most people would never correlate ZIRP with him telling them to save and having the gall to mention compund interest. 100% of 0 is still 0. He says what he thinks people want to hear, they believe him and the MSM never reports the lies. It's quite a good gig when all of the branches of govt. are in collusion with one another against the people and real reporting is dead. Nobody to answer to makes the emperor very happy.

Thu, 06/09/2011 - 11:07 | 1354448 NotApplicable
NotApplicable's picture

Nothin' times nothin' means nothin'.

But it looks like something,

When you say it live on TV.

Thu, 06/09/2011 - 16:15 | 1355522 huggy_in_london
huggy_in_london's picture

Ask him what (1+0.0000)^10 is  ..... There needs to be an interest rate paid for it to compound! hahahaha What a goose!

Thu, 06/09/2011 - 10:27 | 1354303 wombats
wombats's picture

Oooh!  This sounds like a wonderful time to sell.

Thu, 06/09/2011 - 10:33 | 1354327 Seasmoke
Seasmoke's picture

i read that there has never been a better time to buy a house

Thu, 06/09/2011 - 10:43 | 1354350 ugly_avatar_Muir
ugly_avatar_Muir's picture


I would most definitely by the a house on a dip, and silver too.

Thu, 06/09/2011 - 11:10 | 1354473 Silver Dreamer
Silver Dreamer's picture

Sure, assuming you have the 20-30% down and perfect credit.  Banks are not loaning out money right now folks...

Thu, 06/09/2011 - 12:20 | 1354723 Larry Darrell
Larry Darrell's picture

Thats okay, someone greedy will step up to fill the void of making loans to people who can't afford's the Amerrikan way:


From the article:


"With traditional lenders still avoiding risky borrowers in the wake of the financial crisis, hedge funds and other opportunistic investors are stepping into the void. They are going after midsize businesses that cannot easily raise money in the bond markets like their bigger brethren. "


It's only a matter of time before the return chasers branch back out into residential RE loan making.


Thu, 06/09/2011 - 10:40 | 1354353 j0nx
j0nx's picture

I personally know two people that I work with that are actively looking for and ready to buy a house. They refuse to listen to my advice. Hope they have no plans on moving for a decade or more and their neighborhood doesn't get captured by section 8 losers and illegal mexicans like mine did. Flop house right next door to mine is always a pleasure to deal with. Assuming you like 100000000 mexicans coming and going at all hours of the day and night and roaches in your home thanks to them then you will be happy as a clam if this happens to you.

Thu, 06/09/2011 - 10:27 | 1354304 Franken_Stein
Franken_Stein's picture


That can must be shred to pieces already given the many times it has been kicked in the last years.


Thu, 06/09/2011 - 10:33 | 1354307 dick cheneys ghost
dick cheneys ghost's picture

A 20% drop would get us close to the "mean"......would it not?


I also read that we are looking at another 8 million foreclosures in the very near future....giddy up

Thu, 06/09/2011 - 11:04 | 1354446 Boston
Boston's picture

Yes, the mean of 100+ year real home prices (which is barely upward sloping over this time frame).

Two staff economists, back in 12/10), at the Dallas Fed came out with a similar conclusion:  that home prices need to fall by an additional 20+% (from 11/10) to simply to revert back to trend.

Obviously, this ignores the strong probability of overshooting.....below trend.


Thu, 06/09/2011 - 11:12 | 1354475 NotApplicable
NotApplicable's picture

I recently looked up my house that I purchased in 2001 on Zillow. While I've been one of those who would say the price hasn't fallen much, technically it has, but that was because they had estimated the value at the 2007 peak almost 50% higher than I ever considered it worth.

Today it is still about 20% higher than I would value it at.

Thankfully RE taxes on existing homes were not adjusted during the peak. The people that bought new ones though, yikes. They get to pay through the nose.

Thu, 06/09/2011 - 10:29 | 1354308 DarkAgeAhead
DarkAgeAhead's picture

I'll be buying as soon as land's cheap enough, as it's becoming in Detroit, to purchase sufficient acreage to incorporate my own private fiefdom.  If only I were sufficiently Native America, I'd be buying land and repatriating it!

Thu, 06/09/2011 - 11:53 | 1354621 WallStreetClass...'s picture

great idea

Thu, 06/09/2011 - 13:41 | 1354998 DarkAgeAhead
DarkAgeAhead's picture

Yeah, if only one could qualify as Native America, and begin purchasing land to conver to sovereign territory....

There's a Nation near me, which is definitely interesting to drive through.  The local police in this sovereign state, last i saw, was a guy in a rusty Subaru with an AK-47 and a light you plug into your cigarette lighter. [Local law enforcement can only enter the reservation on the Chiefs' permission, given case by case, which makes for some interesting stories of alleged criminals standing there flipping off the local sheriff who's standing just a foot away].

Remake the land as sovereign, and you've created quite a nice little country for yourself, surrounded by the US.

Thu, 06/09/2011 - 10:34 | 1354319 LongBalls
LongBalls's picture

Hell.....I think I might rent my house out furnished and all with rental rates going up. Then I can rent a cheap apartment for myself and come out ahead.

Thu, 06/09/2011 - 10:42 | 1354364 MachoMan
MachoMan's picture

why would residential rental rates go up when inventory is coming on to the market?  I see the same thing as CRE happening...  You'll have to decrease the amount charged to tenants under contract just to keep them there because they'll just move across the street when the contract is up for a giant haircut...  If the rate you advertise to try and get people into your vacant spaces is less than you presently charge your tenants, then you're going to have an upset tenant base...

I also suspect CRE will be converted to RE if necessary...  the fact is, there is a lot of unused, but built, space out there...  that will continue to put downward pressure on prices for the foreseeable future.

Even if the steal of the century came up, I'd only purchase enough to average in over many years...  if it was more than should be risked, then it's a no go.  People who are jumping into purchasing rental properties are going to be sorely disappointed when the rents they can charge are less than their notes and/or can't remotely keep up with cost of living increases/opportunity cost.

Thu, 06/09/2011 - 11:18 | 1354498 NotApplicable
NotApplicable's picture

Not only are existing homes coming onto the market, the home builders have switched to building even more multi-family dwellings (about the only thing left they can get loans for these days).

Meanwhile, anyone trying to rent an older property is going to have a rough time competing.

Thu, 06/09/2011 - 10:49 | 1354378 Troll Magnet
Troll Magnet's picture

the only concern in this economy is your renters not paying rent and you being unable to kick them out for 3-6 months depending on where you live.

Thu, 06/09/2011 - 11:10 | 1354459 MachoMan
MachoMan's picture

Yep.  I strongly suggest partnering with a lawyer or having one that will do the work for a fixed fee that is cheap...  generally speaking though, if a tenant is going to contest their ouster, they'll have to pony up the monthly rent into the registry of the court or face summary judgment/default...  but even with a de minimis proceeding, multiple service fees, filing fees, and lawyer fees add up...  you should be able to be awarded these costs from the court, but good luck collecting.  (maybe you can team up with the dept. of education).

Thu, 06/09/2011 - 10:31 | 1354320 cainhoy
cainhoy's picture

A wicked and adulterous generation seeketh after a sign; and there shall no sign be given unto it, but the sign of the prophet Jonas. And he left them, and departed. They then knew in their hearts that RE would not recover. Ever.

Thu, 06/09/2011 - 10:33 | 1354328 Amish Hacker
Amish Hacker's picture

Record levels of homelessness at the same time as a record number of homes sit empty. Record unemployment, while everywhere you look there are projects that need to get done.

Massive systemic fail.

Thu, 06/09/2011 - 13:15 | 1354905 Greater Fool
Greater Fool's picture


Thu, 06/09/2011 - 15:45 | 1355451 tarsubil
tarsubil's picture

Absolutely. And most people think of the systemic problems as sacred cows: secondary education, social programs, and big banks.

Thu, 06/09/2011 - 10:38 | 1354330 silvertrain
silvertrain's picture

Freakin Farmland aint budging though..Ive been waiting and it isnt moving,atleast in my area which is the mid atlantic..

Thu, 06/09/2011 - 10:45 | 1354362 dick cheneys ghost
dick cheneys ghost's picture

It is in Africa.......Harvard buying land in Africa...

Thu, 06/09/2011 - 11:07 | 1354449 Rusty Shorts
Rusty Shorts's picture


Thu, 06/09/2011 - 13:09 | 1354894 Miles Kendig
Miles Kendig's picture

For good reason

Thu, 06/09/2011 - 10:56 | 1354418 MachoMan
MachoMan's picture

Seeing same thing.  Farm land increasing in price.  Whenever established farmers have land for sale in the near vicinity, they mop it up asap and often times at premiums to general market.

Lot of dumb money coming in from out of the area (wallstreet too) and gobbling up anything and everything...  hit and miss on what they're getting...  whether it be water issues down the road, flood issues, neighbor disputes, access, quality of tenant, etc.

Thu, 06/09/2011 - 10:39 | 1354337 ugly_avatar_Muir
ugly_avatar_Muir's picture

So, in that case, I should just buy silver right?

Thu, 06/09/2011 - 11:06 | 1354444 spartan117
spartan117's picture

No, ammo.

Thu, 06/09/2011 - 13:01 | 1354869 TheMerryPrankster
TheMerryPrankster's picture

No, buy  Silver Ammo for warding off werewolf bankers and remember to keep those wooden stakes sharpened in case Goldman's Vampires want to come by and do some of God's work.

Thu, 06/09/2011 - 10:39 | 1354351 Caviar Emptor
Caviar Emptor's picture

Most analysts so far have been looking for a straight unwind of the housing bubble, and so they're using a time-based formula to predict a bottom: "prices have to return to 1996 levels...". Fail. 

Homes are worth what buyers can afford and are willing to pay. Unfortunately the sale price of a home is only the tip of a huge iceberg of costs most of which are rising. In contrast, incomes and income expectations and job security over the course of a lifetime have been dropping as America gets downsized. 


Thu, 06/09/2011 - 10:48 | 1354386 Seasmoke
Seasmoke's picture

+property taxes +insurance +heating and electric


how low can it go.......1988 ???

Thu, 06/09/2011 - 11:03 | 1354435 MachoMan
MachoMan's picture

it will go as low as the level of wages does...  plus, I think you'll have a generational apprehension about taking on the large debt levels that help prop up prices...  plus, you'll have to account for the craftsmanship (or lack thereof) in a lot of newer residences, which should also have downward pressure...  factor in demographics to boot...  and possibly a decrease in our immigration (no jobs and no dole, no reason to come here)...  and the bottom is the net salvage value of the improvements...

Were houses $1 in Detroit in 1988?

Thu, 06/09/2011 - 16:08 | 1355509 huggy_in_london
huggy_in_london's picture

Are rents going down?

Thu, 06/09/2011 - 10:42 | 1354366 ILikeBoats
ILikeBoats's picture

Shiller slaps Lawrence Yun upside the head.

Thu, 06/09/2011 - 10:46 | 1354379 tony bonn
tony bonn's picture

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

Thu, 06/09/2011 - 10:51 | 1354385 Roger Knights
Roger Knights's picture

"Can the Fed already ..."

Stop right there!

(I.e., Can the kicker.)

Thu, 06/09/2011 - 10:54 | 1354396 Biggvs
Biggvs's picture

Tyler: Love the Lebowski reference.

Thu, 06/09/2011 - 10:58 | 1354411 Superslam
Superslam's picture

"Can the Fed already announce it will buy up every single home in the US at cost already, and get it over with."

I heard Bernanke is personally going to shoot 125 million episodes of "Flip This House."

Thu, 06/09/2011 - 10:57 | 1354422 Stuck on Zero
Stuck on Zero's picture

Sales of homes in my area of Southern California are slow but steady.  These homes sell for $550K to $2.2M.  Curiously only about 20% of the purchases involve a mortgage.  Most are cash or contingent cash.  They are buy ups.  Mortgage companies just are not extending mortgages to anyone.  My nephew wants to buy a $750K home with cash but needs a $180K mortgage.  He has been to six different lenders and does not qualify.  WTF.

Thu, 06/09/2011 - 11:07 | 1354457 Misstrial
Misstrial's picture

OK, but what?

Nephew wants to buy a $750k house for cash but needs a $180k mortgage?

So in reality has $570k cash but needs $180k loan? Why not do a private money loan?



Thu, 06/09/2011 - 11:36 | 1354563 Stuck on Zero
Stuck on Zero's picture

That is being arranged.  The point is ... what the hell are banks thinking?  Of the trillions handed out to banks by the Feds none has reached the public obviously.  I think the baks know what is in store.  Why loan at 5% here with a declining currency when you can loan at 8% in a rising currency like Brazil?

Thu, 06/09/2011 - 14:02 | 1355071 Misstrial
Misstrial's picture

Fed money to banks was merely for recapitalization of the banks' balance sheets. Money went to keep depositors whole. Otherwise all of the culpable banks would have had to shut down.

Oh, also $$$$$ went to recap banks for their CDS losses. CDSs are bets, and as such, we should not have had to pay.


Thu, 06/09/2011 - 16:06 | 1355505 huggy_in_london
huggy_in_london's picture

The banks don't "know something" is around the corner, they are totally self consumed with their rubbish loan books ... they are repairing their balance sheets.  What they do know is that their mortgage books are jammed full of crap, so they are not exactly incentivised to make any more housing loans in america - they are full!  

That said, if you are buying to live in and you are buying close to replacement cost then why not buy... housing is about living in it, not about whether you're going to flip it in 12 month for a profit.  Things can't be too far away from replacement value and if you plan on holding it for 5 to 6 years minimum then I suspect you'll do ok out of it.  

Thu, 06/09/2011 - 13:08 | 1354891 TheMerryPrankster
TheMerryPrankster's picture

offer 500k for the property, if they don't bite walk away and find a motivated seller. It ain't like its a sellers market anymore. If you noticed in the title of the article prices are expected to decline by up to 30%. Why try to catch a falling knife?

If I were looking for a house and had that wad of cash, I'd sit on it for 24 months. Prices of homes will continue to go down for the next 5 years, after that its a guessing game. Washington D.C. will see the only price appreciation until the government collapses, then its a guessing game, houses with safe rooms and bunkers will always go up in value in a "down economy".

Thu, 06/09/2011 - 14:00 | 1355080 Misstrial
Misstrial's picture



Thu, 06/09/2011 - 10:58 | 1354425 curbyourrisk
curbyourrisk's picture

I was at an S&P conference earlier this year...commented about the same thing and was promptly told I was a nutjob by the S&P panelists.  BUT, if Shiller says it....well that's different.

Thu, 06/09/2011 - 11:13 | 1354470 Boston
Boston's picture

I was at a Harvard conference about 10 months ago with Chip Case (the Case in Case-Shiller) and asked why home prices wouldn't revert back to his own 100+ year another 20%+ it always had over the last century.

Case, who was flustered by my using his own data, replied that---in effect---that "this time is different".  His reasoning was nothing other than---because he said so.

As he answered, I shook my head in disbelief, fighting hard not to laugh out loud!


Thu, 06/09/2011 - 12:42 | 1354808 Dr. No
Dr. No's picture

Well, in defense of the panel, if someone with rainbow colored hair and a big red nose made a contradictory statment, I would call them a nutjob too.

Thu, 06/09/2011 - 11:02 | 1354429 web bot
web bot's picture

So we've shot all of our shells target practicing, and now there's a grizzly bear outside the door...

Thu, 06/09/2011 - 11:17 | 1354492 DaddyO
DaddyO's picture




Thu, 06/09/2011 - 11:21 | 1354509 NotApplicable
NotApplicable's picture

Well, at least he can't shoot us!

Thu, 06/09/2011 - 11:09 | 1354455 overmedicatedun...
overmedicatedundersexed's picture

fires and demand on Ins co's does not seem to have happened..wonder why?

guess things are not so bad.

Thu, 06/09/2011 - 11:14 | 1354485 Caught Stealing
Caught Stealing's picture

Thu, 06/09/2011 - 11:17 | 1354496 rfullem
rfullem's picture

guess ill stop paying my mortgage...good luck on foreclosing

Thu, 06/09/2011 - 11:21 | 1354497 rfullem
rfullem's picture

guess ill stop paying my mortgage...good luck on foreclosing

Thu, 06/09/2011 - 11:23 | 1354517 stoverny
stoverny's picture

quick, we need another $8K homebuyer tax credit to convince dumb people to buy overpriced homes

Thu, 06/09/2011 - 11:28 | 1354522 HungrySeagull
HungrySeagull's picture

Houses, houses, houses... MEH!

We built Sod homes 150 years ago while tent cities went up selling 160 acre homestead for the first wagon to stake it in races.

Thu, 06/09/2011 - 11:26 | 1354526 rfullem
rfullem's picture

ah yes, "my" government gives more of my money away to those that dont need or deserve bout an auto tax credit and solar subsidy as well ...I forgot, plenty of blame to go around

Thu, 06/09/2011 - 12:16 | 1354711 jmc8888
jmc8888's picture

That's what's funny.  In bizarro Queen's monetary world, they would rather have the fed buy all the loans than Glass-Steagall null all the loans and give them to their current (or former) owner.

By the U.S. gov't of course, which in turn means you....well 50 percent.

It would be funny to see the fed try to buy up loans they can't get a proper doc about.  So legally could they even, without Glass-Steagall style voided of the mers loan, which in that case, why buy it, it's then gone.



Thu, 06/09/2011 - 14:09 | 1355119 Misstrial
Misstrial's picture

Do your part and ask your U.S. Representative to support H.R. 1489 Return to Glass Steagall Act:


Thu, 06/09/2011 - 12:39 | 1354789 mr. mirbach
mr. mirbach's picture

Housing now reclassified from "investment" to consumer durable good. 

Go long tents and campers.


Thu, 06/09/2011 - 13:11 | 1354881 Federal Reserf
Federal Reserf's picture


Going long on feudalism but not willing to short slavery yet.

Thu, 06/09/2011 - 13:07 | 1354890 ivars
ivars's picture

Not so long to wait for crash and double dip- approx 1 year-and it does not end there:

Thu, 06/09/2011 - 13:11 | 1354892 Miles Kendig
Miles Kendig's picture

Can the Fed already announce it will buy up every single home in the US at cost already, and get it over with. 

No.  There are entirely too many products out there dependent upon a 2%-8% "natural" growth rate in US RRE.  Purchasing the US housing stock at cost is just too little to maintain balance sheets at the TBTF and those addicted to their dog food.

Thu, 06/09/2011 - 13:09 | 1354893 wally_12
wally_12's picture

Not all home prices are falling. We purchased a 3100 Sq. Ft. Log Cabin on Lake Superior in 2008.

My assessed valuation has increased every year. I rent on a weekly basis $900-$1,000.00 per week.

3 houses to the North, Musicians from London have built a huge mansion that includes a sound stage.

I used some equity from my home I purchased in 1976 in Michigan. It is falling in value.

What is most surprising is the accepted belief among neighbors of the impending financial collapse and associated anarchy that will accompany collapse. We have no high speed internet. They are guns, ammo, gold, silver and survivalists people.  My kind of retirement neighbors.



Thu, 06/09/2011 - 13:20 | 1354941 TheMerryPrankster
TheMerryPrankster's picture

Soon we will all be "Survivalists", just some will be more prepared than others. First the world became flat, then the economy flat lined.

Hope you have enough talent and resources to develop a local economy, since that will be the future when globalism turns out to be a fool's dream.

Thu, 06/09/2011 - 13:30 | 1354958 overmedicatedun...
overmedicatedundersexed's picture


Thu, 06/09/2011 - 15:01 | 1355314 WilliamShatner
WilliamShatner's picture

ONLY 10-25%?

I would expect that real estate has about 30-40% more downside, at least.


Thu, 06/09/2011 - 19:08 | 1356144 Stuck on Zero
Stuck on Zero's picture

Home Prices vs. Home Values, Part 2
By Charles Vollum

Last week we looked at the Case-Shiller Home Price Index stated in gold rather than U.S. dollars, and saw that home prices have been setting new record lows for the past year. Yet the Home Price Index only goes back to 1987... Just how low are home prices compared to the decades before these records began?
U.S. Census Bureau data show that in 1963 the median price for a new home was $17,200, or 15.2 kg of gold. In April of 2011, the median new home price was $217,900, or 4.4 kg of gold - 71% less than in 1963!
But let's peer back even further, to the cyclical low of the last century - the Great Depression.
Comparing today's prices to those of the 1930s is a bit harder, as back then most houses were smaller and lacked many of the features we now take for granted. According to The People History, in 1930 the average new home sold for $7,145 or 11.1 kg. By 1935, at the bottom of the Great Depression, the price of a new home had fallen to $3,450 or 3.1 kg - 30% less than the April, 2011 price.
However, in the 1930s the size of an average home was around 1,000 ft2, while today's average home is about 2,169 ft2. So homes now cost about 2 grams/ft2 - 35% less than the 1935 cost of 3.1 grams/ft2. This is even more amazing when one considers that today's homes include central heating and air conditioning, vastly improved insulation, and many other features and conveniences not found in a typical 1930s home.
So home prices today are not just the lowest in the last 25 years, they are actually lower than at the bottom of the Great Depression!
The Greater Depression isn't just a possible future that we might encounter - we are deep in it right now. The truth about our situation is being masked by the massive quantities of money being created by central banks around the world.
The key to surviving and thriving is to have your savings out of reach of the government currency manipulators by keeping it in gold, and to ensure that your investments are growing in gold value, not just showing illusory funny-money gains.

Fri, 06/10/2011 - 19:15 | 1356501 honestann
honestann's picture

Yes and no.

People today pay TRIPLE for their home, when you include interest on their mortgages.

Home prices will continue to fall, fall, fall, fall, fall.  Why?  Because there is an astronomical oversupply AND just about everyone who can get debt today (and most who should not be able to get debt) is already massively in debt.  Add the fact that nobody in their right mind would start a new business today given the blatant predatory behavior of governments, mega-corporations and banksters and absolute, complete, utter lack of rule of law.

Yup.  Keep accumulating and securely hiding gold.  When the people of the world go BERZERK... which they will... you'll be able to pick up a nice home for... well... probably for free.

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