As reported today in The HousingWire, home prices are now a full one third lower than their peak in 2006.
Home prices continued to slide through 2011, dropping 3.9% by the end of the third quarter of 2011, relative to one year earlier.
The Case-Shiller Indexes released today predict that home prices will continue to fall another 1% this year before bottoming out. According to this index, prices are expected to then rise 3.8% in 2013.
However, Yale University Professor Robert Shiller, in an interview with Yahoo!Finance published today, treats these predictions with caution. He notes the challenges that economists face in making accurate predictions when there are not previous similar examples to study and learn from.
According to Shiller, today’s low interest rates probably don’t matter much in determining home prices. What seems to influence prices more is momentum. “So if it's been going up it will continue going up and if it's been going down it will continue going down,” Shiller says. “By that model, which is the most successful forecasting model for home prices, prices will keep going down.”
What seems clear is that the end to the price slide is probably not quite in sight. Shiller also notes that it is difficult to determine what, exactly, is appropriate pricing for housing today, given that we are heading from a period where homes were overpriced. “I don't know exactly where the middle is but it's not like we're overpriced anymore. Now the question is whether we'll overshoot, which is a common thing that happens after bubble burst.
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