Chances are 'substantial' that the United States is headed back into a recession, says economist, author and Yale University Professor Robert Shiller.
A weak U.S. housing market and a murky global economy indicate that the country is at a "tipping point" at the edge of a fresh economic contraction.
Even though economic models suggest the economy is on the path to recovery, the United States is in unchartered territory, which makes models less valid due to all the unknowns lurking on the horizon.
"Forecasting models would say no" on the question of whether the U.S. will face a double-dip, Shiller tells The Wall Street Journal.
"But I’m seeing signs that encourage me to worry about that."
Editor's Note: Alarming: Is a Second Great Depression Bearing Down on Us?
This gripping Newsmax investigative report reveals the truth about America’s economic future. Watch, learn, and receive a free Survival Guide ($49 value) for your personal financial future. This Video Tells All. Click Here to Watch.
Shiller, one of the architects of the S&P Case-Shiller home-price index, says the housing market may see a pickup in prices this summer, but adds he's concerned about the long-term path the sector is taking.
"There might be a turnaround if psychology changes," Shiller says, but "I fear that it may just continue down."
"It just doesn’t look good."
The Federal Reserve has pumped hundreds of billions into the economy in order to spur more robust economic growth, while interest rates stand near zero.
However, all the loose monetary policy in the world won't help if consumer demand just isn't there.
"When the demand isn’t there, you can lower interest rates all the way to zero and people are still not willing to spend — that’s where we are right now," Shiller says.
Red flags continue to wave overseas.
The world is watching how Greece navigates itself out of its debt crisis, with concerns growing that the European nation will default and take European — and U.S. — banking sectors on a wild ride with it.
"Stories like this, even if it’s from a small country, can have a vivid impact," Shiller says, adding the collapse of Greece could topple the global banking system similar to the way Lehman Brothers did in 2008.
"I don’t think it’s overblown," Shiller says of such fears.
Home prices dropped 33 percent in 20 cities through March from their 2006 peak, reaching their lowest level since 2003, according to the latest Case-Shiller report on May 31.
The decline means the sector has double-dipped back into negative territory, as the index fell below its previous post-housing-bubble low set in April 2009.
Shiller has said that U.S. housing prices could decline another 10 to 25 percent over the next five years.
"There’s no precedent for this statistically, so no way to predict," Shiller said recently, according to Bloomberg.
With so many houses in foreclosure, prices will stay depressed, especially with unemployment at 9.1 percent and tighter lending restrictions being the norm at many financial institutions.
Other experts agree that high unemployment rates and a tough economy mean housing prices are still well on their way on a downward slope.
"With the foreclosure pipeline still full to bursting, it’s hard to see this downward pressure on prices abating," says Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto, according to Bloomberg.
"I wouldn’t be surprised to see prices continue to fall this year and maybe into next year."
© 2013 Moneynews. All rights reserved.