Yale economist Robert Shiller says housing prices could continue to fall for years to come. “The peak in the market was around 2006; it went down for three years and if it behaved the same way it had in the last cycle, it would continue going down for years more,” Shiller told the Business Insider.
“The question is will it resume the downward trend? I think it could, maybe not rapidly, but I think there could be further house-price declines.”
Shiller observes that the housing market “had a sudden and sharp turnaround that we rarely see in this market, in the spring of 2009, and that seems to coincide with the American Recovery and Reinvestment Act, which created also the Homebuyer Tax Credit.”
Unfortunately, Shiller notes, that recovery “lasted about as long as the tax credit lasted.”
Right now, says Shiller, state and local governments are retrenching because bankruptcy fears are causing jobs to be cancelled.
“We just saw what happened with the austerity measures in the U.K.; they just had a negative GDP growth,” he says. “I worry that’s going to happen (here).”
“With state and local governments cutting back, that means negative growth. We already passed the time limit for a conventional double-dip, ‘cause we’ve been growing for over five quarters now … it’s a recession that occurs before we have healed from the last one.”
Bloomberg reports that home borrowers will soon need larger down payments and better credit scores, causing fewer borrowers to qualify for loans and the national home ownership rate — already on the decline — to continue to slide.
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