Further Home Price Declines

House Prices to fall 10 to 25%

Robert Shiller, the economist who co- founded the S&P/Case-Shiller index of U.S. home prices, said a further decline in property values of 10 percent to 25 percent in the next five years “wouldn’t surprise me at all.”

“There’s no precedent for this statistically, so no way to predict,” Shiller said today at a conference hosted by Standard & Poor’s in New York.

U.S. home prices plunged 33 percent in 20 cities through March from their 2006 peak, reaching their lowest level since 2003, according to a Case-Shiller report on May 31. The decline signaled a “double dip” as the index fell below its previous post-housing-bubble low set in April 2009. Prices more than doubled from 2000 to July 2006.

A backlog of foreclosures poised to hit the market means prices may stay depressed, dissuading builders from starting new construction. Unemployment, which rose to 9.1 percent in May, and stricter lending conditions are signs that any recovery in housing may take years.


As leverage (debt) continues to be purged from the financial system, the areas that had the highest degree of leverage are suffering most.

At some point, I anticipate the derivatives market to undergo a similar fate as the housing market.

What seems unbelievable to me, is the denial in many countries that are in the earliest stages of house price decline, that they do not have housing bubbles.

Extremely low interest rates have masked this problem, but a day of reckoning is coming, probably sooner than we thing.


  1. Evening to you PW.

    Strong earthquakes are setting off a powerful volcanic eruption in Eritrea (based on satellite images)


    A very interesting week in all categories.

  2. 5.5 aftershock.

    GeoNet – New Zealand Earthquake Report - Jun 13 2011 at 1:00 pm (NZST)


  3. Thanks for the links Bill.

    The level of seismic activity does seems to be picking up. Interesting the New Zealand quake was in exactly the location as predicted a few days ago.
    What puzzles me about the Eritrean quake and eruption is that there seems to be virtually no media coverage of this significant event.


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