NEW YORK, Jan 22 (Reuters) - The U.S. housing market slump is nowhere near over and home prices will probably keep falling well into next year, according to one of the property market’s most well known economists.
Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor’s S&P/Case-Shiller Home Price Indices, told Reuters that while he does not give quantitative forecasts, the futures market indicates the downward trend in home prices is far from over.
“The futures market, based on the indices at the Chicago Mercantile Exchange, predicts that home prices will continue to decline well into 2010 and could go down another 10-15 percent,” he said.
“The forecast could possibly be right and indicates things could get worse,” he said.
The market is only midway through the crisis if the forecast is right, he said.
“While I do not want to be bearish, there is a possibility that the decline in home prices may persist even longer than that because of the drop in confidence that we have seen, which is really historic,” he said.
Prices of U.S. single-family homes plunged a record 18.0 percent in October from a year earlier, Standard & Poor’s said last month, with the drop in prices accelerating as unemployment rose.
The Standard and Poor’s S&P/Case-Shiller Home Price Index for 20 metropolitan areas fell 2.2 percent in October from September, accelerating for the fourth straight month.
S&P said its composite index of 10 metropolitan areas declined 2.1 percent in October from September for a 19.1 percent year-over-year drop, also a record for the index which dates back to 1988.
The U.S. housing market is in the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards, and record mortgage foreclosures push down home prices.
Economists believe the housing market will not begin to recover until home prices fall far enough to revive demand.
One glimmer of home for the hard-hit U.S. housing market has been the recent trend lower in mortgage rates.
“If you have lower mortgage rates that definitely can help support home prices,” Shiller said.
“But, if you look at the recent boom and bust in housing, it is not explained by the mortgage rate,” he said.