The housing economist who predicted the massive housing crash sees a down year ahead and, worse, believes that renewed housing problems could trigger a second recession.
“It’s not entirely clear that this is a double-dip in housing, but it’s starting to look like housing is beginning to resume the downtrend from 2006 to 2009,” says Robert Shiller, Yale professor and co-creator of the S&P/Case-Shiller Home Price Index.
The latest Case-Shiller numbers show prices fell in October, down 0.8 percent from a year ago. Some metro areas are just now recovering to prices they saw a decade ago, while others — notably Detroit — are struggling with catastrophic price declines.
What’s driving the slow real-estate market, in Shiller’s estimation, is the jobless rate. He sticks to his view that the risk of a return to recession is real and that housing is symptomatic of our economic sluggishness.
“We haven’t recovered. We still have a 9.8 percent unemployment rate. We have 4.1 percent long-term unemployment rate, which is extremely high. It’s typically around 1 percent. We’re at near record levels on that,” Shiller told Fox Business. “Something isn’t quite right.”
Recessions do end, Shiller points out, when people finally are forced into buying to replace durable goods like cars and appliances. Oddly, the housing slowdown might be part of the reason retailers did so well this Christmas, Shiller says.
“There is a sense right now of ‘Let’s put this behind us. Let’s have a good Christmas. Let’s buy presents and let’s have a good time,'” Shiller says.
“So it’s carrying us forward, and maybe it will. But the real-estate market declining is a sign to me that maybe it won’t hold.”
He isn’t calling for a housing disaster in 2011. But his view does diverge from those of other professional forecasters, who believe that housing will be generally flat for the year.
Despite low rates and already brutal pricing pressure in overbuilt markets, the threat of hundreds of thousands of homes in the foreclosure pipeline doesn’t bode well for a housing rebound anytime soon.
Quite the opposite, Shiller warns.
“The worry is, we might have a stagnant housing market for years,” says the Yale professor.
“Just this month we saw a 1.3 percent decline. If you’re leveraged 10-to-1, that’s 13 percent in one month. That’s real,” Shiller says.
Forecasters aside, consumers seem to “get it” about the weak recovery so far.
Private research from the Conference Board shows that its index of consumer confidence fell to 52.5 in December, down from a revised 54.3 in the November survey.
The index would need to get to 90 to show a full recovery, a figure it hasn’t seen since December 2007.
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