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Saturday, October 23, 2010 9:18 AM


Home Prices Double Dip in "Sudden Dramatic Drop"; 20% More to Come says Gary Shilling


Clear Capital™ has issued a special press release report on home prices that shows a Sudden and Dramatic Drop in U.S. Home Prices

TRUCKEE, Calif. – Oct. 22, 2010 – Clear Capital (www.clearcapital.com), is issuing this special alert on a dramatic change observed in U.S. home prices.

“Clear Capital’s latest data shows even more pronounced price declines than our most recent HDI market report released two weeks ago,” said Dr. Alex Villacorta, senior statistician, Clear Capital. “At the national level, home prices are clearly experiencing a dramatic drop from the tax credit-induced highs, effectively wiping out all of the gains obtained during the flurry of activity just preceding the tax credit expiration.”

This special Clear Capital Home Data Index (HDI) alert shows that national home prices have declined 5.9% in just two months and are now at the same level as in mid April 2010, two weeks prior to the expiration of the recent federal homebuyer tax credit. This significant drop in prices, in advance of the typical winter housing market slowdowns, paints an ominous picture that will likely show up in other home data indices in the coming months.



Both Clear Capital and S&P/Case-Shiller indices have displayed consistent market peak, trough, secondary trough, and tax credit run-ups. Despite these consistencies, a critical difference is that HDI’s patent pending methodology enables more timely and granular reporting. Therefore, if previous correlations between the Clear Capital and S&P/Case-Shiller indices continue as expected, the next two months will show a similar downward trend in S&P/Case Shiller numbers.
Shilling Calls for Another 20% Drop

Video: Gary Shilling says single-family home prices will drop another 20% over the next few years with number of homeowners underwater to rise from 23% to 40%.



Excess inventories of 2.1 million are the "mortal enemy" of prices says Shilling. "A 20 percent decline would bring us back to the long-term trend, all the way back to 1890. I am a great believer in reversion to the norm".

I agree with Shilling on those points.

It's a great interview, much more to hear, including a forecast on 30-year bond rates of 3%.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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