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Peter Schiff: Here’s Why Home Prices Have To Decline At Least 20% And Probably More

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Gregory White
Business Insider
Friday, December 31, 2010

House prices have to decline at least another 20.3% to come back to the historical trend and may have much further to fall, according to Peter Schiff of Euro Pacific Capital.Writing in the Wall Street Journal, Schiff breaks down the horrible state of the U.S. residential real estate market just days after a negative Case-Shiller number pretty much confirmed we’re in a housing double-dip.

Schiff explains that, if we all believe that we were in a housing bubble, then house prices need to come back to the historical trend line before we’re actually through this.

But that 20.3% is only the beginning of the break.

(ARTICLE CONTINUES BELOW)

Peter Schiff: Heres Why Home Prices Have To Decline At Least 20% And Probably More aj150709banner1

From Peter Schiff (in the WSJ, emphasis ours):

With a bleak economic prospect stretching far out into the future, I feel that a 10% dip below the 100-year trend line is a reasonable expectation within the next five years, particularly if mortgage rates rise to more typical levels of 6%. That would put the index at 114.02, or prices 28.3% below where we are now. Even a 5% dip would put us at 120.36, or 24.32% below current prices. If rates stay low, price dips may be less severe, but inflation will be higher.

Because of high unemployment, and little short-term hope for a jobs recovery, this darker vision makes a lot more sense, according to Schiff. He also blames the poor outlook on high levels of private and public debt and feels Fed activity to prop up the market is only delaying a real recovery.

Read the full piece at WSJ.com >

This article was posted: Friday, December 31, 2010 at 3:20 am





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