Shiller: Housing Could Fall Another 25% But Is Harder to Predict Than the Weather

Home prices may have been flat but since buying a home is a LEVERAGED investment most people still made a lot of money by buying homes. However, LEVERAGE works both ways as people who bought at the top of the bubble found out.

Rich people inherit houses or have no problem buying what they want.
Poor people rent or if they can't afford rent they live with their family and try to get rent sudsidy from the welfare, section 8.
That leaves the middle class to buy houses, with few exceptions.
The problem is the middle class is shrinking every year.
The middle class unemployment rate is high and rising, and you can't get a morgage when you have no job. The credit rating of millions of the middle class has been ruined and it will take many years to repair the credit rating. Higher down payments are being required and you can't save for a down payment while earning low wages.
Housing looks very dreary for many years unless we can stop companies from outsourcing their labor to foreigners.

"U.S. home prices were flat from 1890 to 1990, according to Shiller, meaning the whole concept of housing wealth was 'a bill of goods.'" Um, no. Housing wealth isn't suppossed to be really from the appreciation of the house over inflation, it is that the money you are spending for your housing is going to building your own equity over building someone else's equity as a renter.

A "house" is something you "buy" and live in. A "home" is something you invest your heart and soul into and make loving memories.

I am not blind to the fact that the housing value downturn is real and to put it simply...it hurts. I have just come to grips that I am not moving in the foreseeable future.

I was recently going to refinance my home but shied away as I wasn't sure that I wanted to know what the decreased value of my home actually was. Furthermore, being four years into the note, I am noticing now that I am paying significantly more principal balance down per month with less going to interest. Not to mention that I'd add $5,000 to my current balance and be back out to 30 years.

Now, I will either wait this dreadful housing period out or I'll live where I am for the rest of my life, being 40 yrs old. That's not the worst thing...I have a loving family and a roof over my head.

No matter how bad I or anyone reading this thinks they've got it, every one of us is better off than 90% of other people in the world. Some people die of starvation for cripes sakes!

If you believe in the law of supply and demand then when you have more people selling vs buying prices will continue to decline. What needs to happen is to allow the markets to hit bottom so the healing process can begin. The longer all the modifications and bad mortgages are allowed to be carried by the banks, the longer this down fall will continue.

If the dollar devalues and inflation soars, would you rather rent or own? A home is still a good inflation hedge. Landlords will pass on the costs of inflation to you. A bank with a fixed rate mortgage on your property can't.

the economy is all about jobs. people without jobs cannot buy houses. soon as the job market recovers the housing market will recover. people keep forgetting that housing is a secondary market. before people can start bidding up the prices of houses again, more people have to have jobs. it just kills me that people are still talking out housing. housing is irrelevant until the unemployment figures come down

we had a housing bubble in TX during the oil boom of the 1980's, when the bust occurred, prices drops 30-50%. It took 10 years for prices to climb back to even. We've got years to go, especially the after the widespread damage done to the economy by wall street this time around.

Housing CAN and probably WILL fall further all across the country. And that includes FL, NV and CA markets which are already hammered... Listen folks..., it all comes down to supply and demand. Always does... And the areas that are going to continue to get hammered are where overbuilding took place and/or is still taking place... Unfortunately, the banks let delinquent borrowers remain in their homes for the past several years, and that artificially held up prices and didn't let them reach bottom yet... Now that the big banksters are finally playing hardball and foreclosing, the number of homes on the market is going to skyrocket and add to an already plump supply of unsold homes... Thus, it's almost a certainty that prices will have to fall quite a bit farther to help bring the supply/demand equation back into balance by say 2013-2015 or later... And all this is REGARDLESS of what it costs to actually build a home these days... In this situation, I'd also suspect building supply prices to actually fall, and prices charged by builders' labor to decline... It'll all have to work itself out, and thus far we've only seen part of that equation play out... Hate to say it, but Bobby's probably right on the mark...

That may be the case in FL, NV, spots of CA and some other places, but here in MD, VA, NJ, and NY - prices are still way above median income levels.

This point needs to be restated: Housing has been flat over the last 100years when adjusted for inflation. This only makes sense. If you have the same amount of inflation adjusted dollars, you can only afford the same amount house. There will be localized volitility but long term you don't make money on them with any regularity.
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You buy a house becasue you will live there for many years, not as an investement.

This is awesome. I am a young adult still living at home saving up cash for a down payment. Keep the drops coming!

Basic economics.

Housing prices will drop until the average house is around 3 times the average income, 4 at the absolute max. That is the only stable, sustainable price for a house - it is all you pay back in a 30 year mortgage and still have a life.

This means that electricians, plumbers, dry-wallers - bascially, all the trades that had their salaries double and triple during the boom - have to see their real wages reduced by as much as 50% before the industry will be competitive again.

And realtors - they are already struggling to justify their existence, much less the 6% fee they charge. All the information is readily available online - actually, more information than realtors disclose. Realtors should be fixed fee, not commission.

There is still a lot of pain to come.

Cost of replacement becomes part of the equation at some point.
Housing and oil both have costs to replace and market.
Devaluation of the US Dollar is the other major factor.
Shiller is an expert and look where we are with all the experts running the show.
Income to debt ratio is the key.
Think for yourself to succeed.

As long as there are property tax and association fees for your home you are still borrowing the land from your lord. Stop paying either of them if you don't believe me and see what happens to your paid off home.

If the housing market is harder to foreccast than the weather then why do it?

The downside is the price of energy to heat your house and property taxes. In my state the property tax keeps going up and the valuation keeps going up regardless of real comps or reality for that matter.

When you factor in 3-4K to heat a home with the thermostat at an uncomfortable 62F all winter and the area towns refusing to reduce any spending (I pay 7K a year for a really old home) owning a home is way out of line with the new wage basis today.

My advice as a homeowner, rent. The whole system is completely broken.

I agree with him based on I know with the current trade rules. That ofcourse are totally backed by the corporate lobbyist. Wages will continue to drop and home prices will be forced to follow. Dont forget also when interest rates start to go up that will increase morgage payments, So people will forced to sell even cheaper to keep morgage payments at a rate the buyers can afford.
They told us the global economy would be good for us. What they meant was it would be good for the corporations

Housing will definitely fall another 25% or so but that doesn't mean home ownership is a bad thing. I would much rather own than rent. The problem is most people buy more house than is necessary. I have a 1500sqft house with a 2 1/2 car attached garage on a 1/2 acre lot in St. Clair Shores, Mi. My house payment is under $500. My neighbor who is renting pays $1200/mo has no garage half the lot and 900sqft. house. The property taxes are falling which is making it even cheaper. You can't rent a house in the ghetto for my house payment.

Good thing my house is paid for.