Shiller: Housing Market Is Nowhere Near Bottom

Seeking Alpha reports:

Yale University economist Robert Shiller, co-developer of the S&P/Case-Shiller Home Price Indices, told Reuters Monday he believes the housing market's slide is by no means nearing its conclusion. Shiller said not only are forecasts of a bottom in 2008 probably wrong, but 2008 could see a decline even worse than that of 2007. "There is a probability of a continuing decline for a period of years, bringing prices in many cities down in the 10s of percent," he said. "The bottom is hard to predict. I do not see it imminent and it could be five or 10 years too." Shiller gained prominence with the bestseller Irrational Exuberance, which warned that stock valuations were too high just before the dotcom bubble burst in 2000. He also raised red flags during the real estate boom, which he said showed signs of infection by "investor psychology." "We have seen housing bubbles many times in history, but they have been much more local than this one," he said during the interview. Shiller forecasts that the areas likely to be hardest hit by plummeting home values are those that saw the most precipitous ascents during the boom and those at the center of the subprime mortgage meltdown, with California and Florida well up on the list. The S&P/Case-Shiller Home Price Indices have seen eight consecutive months of negative annual returns for existing single-family homes through August. "Based on the futures market for the S&P Case-Shiller Composite Index, we are looking at home prices down another 5% in 2008," Shiller said.