Gary Shilling: Why House Prices Will Fall Another 20%

Depressing but filled with good information. This is Gary Shilling of the Cash-Shilling housing price index, so he knows what he’s talking about.

Major reasons:

  • Reversion to the long-term mean.
  • High unemployment expected to continue.
  • More houses now underwater.
  • More houses now in foreclosure.
  • Low rate of household formation.
  • Excess inventory, including the shadow inventory of repossessed homes.
  • Repossessed homes tend to sell for firesale prices, which depresses the market.
  • Interest rates will go up, which historically pushes house prices down.
  • Credit is getting tighter, which means there are fewer buyers.
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