20% Drop in Housing to Cause Recession in 2012, Says Gary Shilling

Shilling says the shock to trigger the next recess is "another big leg-down in housing." (An asset class the Fed has not been able to reflate.) As those familiar with Shilling know, his forecasts are generally bearish. However, in his defense, Shilling was one of the few economists who correctly predicted the dangers of the subprime mortgage market and its impact on the broader economy. The problem with the real estate market remains excess inventory. Based on Shilling's research, there are 2 million to 2.5 million excess homes in the country -- a supply that will take 4-5 years to work-off. The result: Housing prices will fall another 20% and underwater mortgages will balloon from 23% to 40%, he says. With housing slumping again, Shilling says recession is coming to a town near you in 2012.

Source

Another member (camaro68ss) just posted yesterday that he received some information from a government insider that this would be the next leg down.(and he caught a bunch of flak for it too because of the source) Well here is some validity to that story. Home prices dropping another 20% is not good for anyone. The problem is there are just too many homes on the market for prices to stabilize at this point. It all falls on supply and demand, and lets face facts here we are very heavy on the supply end, and falling short on the demand side.
If this does actually trigger the next dip in the recession in 2012, maybe all the predictions will be financially related after all. Still that aside all this shows is that the economy is far from recovered, and more and more each day it's starting to look like we might still be going backwards.

You do not need to be a government insider to know the housing market is going to take a dive. Listen, the thing is people cannot afford their homes because they do not have jobs. Fix jobs and housing can be fixed. The tools are there for people to stay in their homes, the only thing they need is money to do it with. People forget these things when they are so critical of banks and the governments program.

People need money to pay for their house

Investors need a legitimate return on their investment

People need jobs to get money

When people get jobs they can pay for their house.

When people pay for their houses and have extra money to invest values will increase..

Let's get something straight...

The numbers which show we're out of a "recession" are bogus.

Even the notion that we're in a mere recession is bogus.

We entered a recession in 2000, after the rate of increase in worldwide oil production started to decline.

We entered a depression in 2008, some months after true cheap peak oil production declined.

We're likely going to enter collapse in 2011-2012, after global energy/food supplies can't adequately reach the needs of a good chunk of the populace.

Everything else seems to be distractions.

reply to post by SpaDe_


That guy Camaro68 took way to much flak for letting us know what he heard, i think it was unfair of ATS to treat him like that. He is probably going to be vindicated by events unfolding in the next 6 months as i can't see the economy growing from this point forward due to lack of employment coupled with rising energy and food costs.

Originally posted by etombo
You do not need to be a government insider to know the housing market is going to take a dive. Listen, the thing is people cannot afford their homes because they do not have jobs. Fix jobs and housing can be fixed. The tools are there for people to stay in their homes, the only thing they need is money to do it with. People forget these things when they are so critical of banks and the governments program.

People need money to pay for their house

Investors need a legitimate return on their investment

People need jobs to get money

When people get jobs they can pay for their house.

When people pay for their houses and have extra money to invest values will increase..

I work in the construction trade, so I see every day the real issues with housing. People are broke there is no doubt about it. What I said about the government insider thing was just to reference another members post that was seriously flamed due to his source.

Originally posted by unityemissions
Let's get something straight...

The numbers which show we're out of a "recession" are bogus.

Even the notion that we're in a mere recession is bogus.

We entered a recession in 2000, after the rate of increase in worldwide oil production started to decline.

We entered a depression in 2008, some months after true cheap peak oil production declined.

We're likely going to enter collapse in 2011-2012, after global energy/food supplies can't adequately reach the needs of a good chunk of the populace.

Everything else seems to be distractions.

edit on 14-7-2011 by unityemissions because: (no reason given)

I have been telling friends and family this for a long time, but they just keep repeating like mocking birds what they see on the news, and read in the papers. If things truly were stabilizing at all then why are unemployment numbers still climbing during summer farm season? Just one of many indicators that all is not well.

reply to post by unityemissions


See now why can't everyone see things like this guy? Spot on on everything he said in that post, we just need our fellow humans to see this thing coming so we can prepare and save some lives.

reply to post by epsilon69


Because most people are not as pessimistic as this guy.

reply to post by SpaDe_


Unemployment climbs due to job elimination which may or may not be a result of our current brilliant city planner and his charming tax plans

Originally posted by etombo
reply to post by epsilon69

 

Because most people are not as pessimistic as this guy.

Correction, I'm a realist.

I would assert that most people are pathologically optimistic.

reply to post by unityemissions


Well. That is subjective

Gary Shilling is known as a bear.. We probably do have 3 or 4 years of flat housing market, but this next round of stimulus may include tax credits and benefits for buyers. The banks are just holding a lot of property off the market to keep prices up. This backlog of foreclosed homes is an investment for them and they obviously don't mind waiting a few extra years to put the inventory back on the market if it prevents a big price drop.

If the banks foreclosed and evicted delinquent homeowners sooner would that increase demand? Theoretically that would put price pressure on the rental market for a few years, but people being evicted would head for the low end multi family rental communities not buy new houses.

Originally posted by epsilon69
reply to post by SpaDe_

 

That guy Camaro68 took way to much flak for letting us know what he heard, i think it was unfair of ATS to treat him like that. He is probably going to be vindicated by events unfolding in the next 6 months as i can't see the economy growing from this point forward due to lack of employment coupled with rising energy and food costs.

thanks for the D, Im telling you, news is braking every day about this 2nd housing market dumb. Its going to be bad.

Yes it is going to get bad. HOWEVER... If people get jobs to pay for their homes it can be avoided..

Originally posted by etombo
Yes it is going to get bad. HOWEVER... If people get jobs to pay for their homes it can be avoided..

Dig DEEPER...

reply to post by SpaDe_


Quite frankly, I'm not sure what the way out (if there is one) of this situation is. It's like a loop.

The economy stinks because people aren't buying. People aren't buying because they don't have jobs. People don't have jobs because employers aren't really hiring. Employers aren't really hiring because the economy stinks. See the issue?

Originally posted by etombo
Yes it is going to get bad. HOWEVER... If people get jobs to pay for their homes it can be avoided..

Jobs are not all that is needed, what is also needed is an income strong enough to pay for your mortgage while filling up your tank and putting food on the table. This is going to get more and more difficult as wage growth has been stagnant for the last 10 years and probably more considering the governments numbers aren't necessarily the best kept. But what causes wages to grow is productivity and what causes productivity increases are capital goods like tractors and factory equipment and energy is needed to power this equipment.

If energy prices in the form of oil increase they do two things simultaneously to our little home owner trying to tread water they decrease his wages at the same time increasing his food and energy costs to heat his home and travel to work. This leaves less and less for him to spend on consumer goods.

As oil prices increase - and they will increase until demand collapses because we have reached the supply peak in oil. Then this means that more and more low income earners are going to be forced out of their homes. As this happens retailers and banks who relied on their consumer spending are going to go broke causing a massive domino effect that will take down state and local governments relying on bank loans to pay for their costs as tax income collapses.

Now this leads to the last man with his head above the water on this sinking ship, the federal government they can either bail everyone out or not bail everyone out and that is the million dollar question because if you can answer that you can hedge accordingly.

The real estate market burst in Japan back in 1991 and prices fell for 16 years!
I'm sure this contributed to Japans economic "lost decade".

www.statusireland.com...

I originally thought that the US might take more of a free market approach and let real estate prices bottom out rather than encourage the banks to keep a backlog of foreclosures off the market. Perhaps the elite bankers know its easier to manage a long drawn out price slide?

reply to post by epsilon69


You know exactly what I mean. I am not saying give someone a job that pays 4 cents an hour. You are insulting me. I have an understanding of the mortgage industry and the reasons for default that I guarantee goes far beyond yours. A major issue right now is lack of income. How is someone supposed to pay for their house without income? I suppose the banks should just give the properties away? People need to WORK before they can fix this problem. Fix unemployment and you can fix the housing market. With housing fixed people can start to spend money on other things. A recession is a lack of spending. People cannot spend money without money, and people who have it to invest will not when the market is jacked up. FIX the jobs and you will fix the market.

My understanding of the economy is very limited, but haven't we been in a depression since it got bad like 10 years ago? A recession is less than 6 months, and our debt has only increased, so how did we end the recession while simultaneously doing more damage to the economic state of this country?