This isn't technically areal estate story, but I think it's always interesting to see what Robert Shiller is saying. He called the tech bubble in his famous "Irrational Exuberance" book and warned about the housing bubble for years. Contrary to the most bullish projections--which call for a rebound in housing next year--Shiller thinks the recovery may take a lot longer than that.
I think the importance is that the housing bubble did help prop up consumer spending. It's estimated that homeowners were pulling out between $600 and $700 billion a year through home equity lines and then using that money to fund consumer spending. If Shiller's right, we're not going to see that dynamic return for a long time.
What's more, Shiller, who is also co-founder and chief economist of thefirm MacroMarkets LLC, said predictions for a bottom within the next year or so are probably wrong, with price declines in 2008 possibly worse than those seen this year.
"There is a probability of a continuing decline for a period of years, bringing prices in many cities down in the 10s of percent," Shiller said in an exclusive interview.
"The bottom is hard to predict," he said. "I do not see it imminent and it could be five or 10 years too."