Shiller: Housing Has Not Yet Begun To Collapse

With the exception of E*Trade (ETFC) and a slight slowdown in holiday ecommerce spending, the digital industry has thus far survived the housing and sub-prime meltdowns. We continue to believe, however, that the reprieve is likely temporary and the plunging housing sector will eventually suck just about everything else down with it.

But don’t take our word for it. Just listen to Yale economics professor Robert Shiller, the man who called the top of the 2000 stock-market bubble in 2000 and predicted the current housing crash loudly and clearly for two years before peak.

Shiller from The Times:

“American real estate values have already lost around $1 trillion [£503 billion]. That could easily increase threefold over the next few years. This is a much bigger issue than sub-prime. We are talking trillions of dollars’ worth of losses.”

“Over the next five years, the futures contracts are pointing to losses of around 35 per cent in some areas, such as Florida, California and Las Vegas. There is a good chance that this housing recession will go on for years.”

“This is a classic bubble scenario. A few years ago house prices got very high, pushed up because of investor expectations. Americans have fuelled the myth that prices would never fall, that values could only go up. People believed the story. Now there is a very real chance of a big recession.”

Past performance is a lousy predictor of future results, and we could yet stage a miraculous escape. But the odds are we won’t.

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