Photo: Bloomberg TV
Everyone thinks the housing market in the U.S. looks like it’s starting to bottom.Famed economist Gary Shilling is not one of them—you could call him notably bearish on housing.
In fact, he expects prices to drop another 20 per cent from here and doesn’t think we will see a bottom in the market for another several years.
The main reasons Shilling is so pessimistic: There is a huge supply of excess inventory not being accounted for, and prices still have not fallen to anywhere near long-term historical averages.
In his monthly INSIGHT client newsletter, Shilling outlined his bearish housing thesis and used several charts to illustrate why he thinks there is no bottom in sight for the U.S. housing market, and more pain is ahead for American homeowners.
Note: Thanks to Gary Shilling for giving us permission to feature his charts.
That's such a huge number because the number of new housing starts and completions before the collapse was only about 1.5 million per year
Meanwhile, the rate of home-ownership in the U.S. continues to plummet, adding pressure to excess inventories
And there is a clear inverse correlation between the rate of home-ownership and the percentage of 25-34 year olds living in their parents' homes (which is still skyrocketing)
...but those numbers don't take into account around 5 million delinquent mortgages and foreclosures that add to supply...
The correlation between new listings and sale prices reinforces the idea that falling prices keeps sellers away from the market
The proportion of mortgages originated between 2008 and 2011 that are seriously delinquent (90+ days) is rising
Mortgage modifications will only work if they include federal mortgages – the bulk of them – which the government has been reluctant to do
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