InvestorCenter

Gary Shilling: Home Prices Could Fall 20% More

by Nikhil Hutheesing Nov 5th 2010 8:33AM
For a while, it seemed the housing crisis had been averted. Earlier this year, prices started inching back up, foreclosures slowed and falling mortgage rates were expected to boost sales. The government's housing credit of $8,000 helped cause a spike in home sales, but the effect quickly wore off.

Now, Gary Shilling, president of economic consulting firm A. Gary Shilling & Co., says an excess of homes on the market remain unsold. Because of that, he believes that instead of getting better, housing prices could fall another 20%, which would lead to a rise in foreclosures.

Watch the short video above for Shilling's insight.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »
View All Courses

Add a Comment

Sign in »
*0 / 3000 Character Maximum

176 Comments

Filter by:
founder74

Three points:
(1) For years Americans have been spending too high a percentage of their income for housing. High percentage outlays for housing have left a large part of a generation of Americans too poor to grow old with economic health and safety. Had housing expenditures, more typically, been 20% of annual income, Americans and America would be in better shape. Look for outlays for housing to decline as a percentage of gross income. This feeds through to force down housing prices. (2) The cost to properly maintain and preserve residential property has been understated. I call it the "last fool out of the pool" syndrome. I believe the typical homebuyer over the last 20 years, especially among new home buyers, have deferred and will defer maintenance; expecting to move out before costly maintenance and repair problems hit. Eventually, the repairs need to be done; and the "last fool" gets stuck with the bill. Add to this common syndrome, the revelation that things like asbestos and lead paint are dangerous and need to be properly addressed. Surprise! Surprise! Surprise! Look for real estate appraisers to become more mindful of real maintenance and preservation-of-asset expenses, and the real costs associated with physical deterioration. (3) Americans waited for inflation to bail out their overpayments for housing; forgetting that, in the end, supply and demand matter--and the last person that owns the property when the bubble bursts, get hurt. Of course the corollary is, the last party (the US taxpayer) holding the mortgage of the last owner, likewise gets scalded. Look for an embattled federal budget that makes economic growth sluggish; job creation problematic; and government bond investors uneasy, if not reluctant.

January 26 2011 at 10:52 PM Report abuse rate up rate down Reply
shortermrentals1

Does anyone out there have any experience with a seller's realtor "threatening that the mortgage holder will chase them forever, take their home (the one they live in, not the investment home they are trying to short sell!) garnish their wages, etc. etc. if they don't sign a $50,000 promissory note to the "mortgage insurance company"; so they will o.k. the short sale?

Thanks for your input!

January 21 2011 at 10:54 PM Report abuse rate up rate down Reply
mp9281

The housing market is definately going to go down as long as mortgages are still being given out for practically nothing down. That is how we got here in the first place. well, that and adjustable rate mortgages. Do a short sale while you still can. Dont let your property devalue any further if you cant afford it. Check these guys out. www.helpyoushortsell.com They can help and they dont charge you anything.

November 08 2010 at 9:35 AM Report abuse rate up rate down Reply
Peter

Imagine my disappointment when this story was cut off after the lead paragraph. If the internet is going to replace the newspaper, it must offer us syntax-oriented folks some words to hang on to. Video alone just doesn't cut it. Not on TV, not on the internets. If the present trend continues, pretty soon there won't be anyone left who can spel.

November 07 2010 at 11:40 PM Report abuse rate up rate down Reply
vjschultz

It is amazing to me that today, November 7, 2010, Banks and Lenders still provide loans to buyers without a minimum 20% down payment. I cringe when I watch buyers on HGTV continually buy homes with little or no down payment. In some cases, they are so short of funds and savings, they have to request cash back at the close of escrow to pay for the closing costs. These people have NO business buying a house. If they lose their job or have one small financial setback, they are in the poor house and headed for foreclosure. Have we not learned anything from the debacle of the last few years? Our government is continuing to encourage and allow people to buy homes that they can ill afford. Let's clean up this mess!

November 07 2010 at 1:59 PM Report abuse +1 rate up rate down Reply
missbrasil

Stability in home prices can only come when people start doing their math and lose fear and the wrong attitude about buying a home - buy because you like it, buy because it would cost you the same if you built one,buy bcz it will be your home and not a commodity, and just spend within your means. (why ever borrow on the value of your home???)

November 07 2010 at 1:42 PM Report abuse +3 rate up rate down Reply
missbrasil

BANKS and REALTORS were the problem before and the problem now, and GREED. (and they get prizes no matter what, the people who need the trillions get zilch)

November 07 2010 at 1:40 PM Report abuse +1 rate up rate down Reply
squeezabuck

damn

November 07 2010 at 1:11 PM Report abuse rate up rate down Reply
scardenas95

Home prices have actually gone up quite a bit in South Texas. Due to the border violence in Mexico, a substantial amount of people have purchased homes in the Mcallen-Brownsville area. Interesting.

November 07 2010 at 12:41 PM Report abuse rate up rate down Reply
trickytravistime

Look at Jeff from flipping out. He would walk around and go knock this down put new wall here and could not read or write a blue print to save his life, and still made a fortune.

November 07 2010 at 12:28 PM Report abuse +1 rate up rate down Reply