Home Price Expert Shiller: Housing Industry Still 'Abysmal'

Robert Shiller, the Yale professor, is one of the creators of the monthly S&P Case-Shiller housing price index, one of the most widely watched in the economy.

He's got some bad news for you.

Even though the slowing rate of decline in home prices is likely to continue, the housing market is "still in an abysmal situation," Shiller said in an interview with TechTicker today, which you can see here:

Shiller flagged what The Ticker (No relation to TechTicker; curse that Henry Blodget for stealing our mojo!) has been saying for months: there is a "shadow inventory" of housing out there much greater than the 10-month inventory of unsold homes frequently reported.

Let's make this clear: A stable real-estate market has about a six-month supply of unsold housing. A 10-month supply is a stalled housing industry. "Shadow inventory," however is made up of houses that are yet to go into foreclosure but inevitably will as unemployment remains high and probably increases.

This is analogous to the actual unemployment rate we always flog. The official U.S. unemployment rate is 9.5 percent. But if you include all the people who should have full time jobs that don't (those who have given up looking, part-timers, self-employed out of work and others "marginally attached" to the labor force) the actual number is 16.5 percent. And that's from the Labor Department.

But, wait: Prof. Shiller has more bad news for you! The possibility of another ruinous housing bubble -- likely on the regional level -- is not out of the question!

Woo-hoo! Where's my sub-prime jumbo?

Shiller said speculators bottom-feeding off of foreclosed houses could create "another bubble" in housing, once the excess inventory is worked off. "This is not my more probable scenario [but] people have gotten very speculative in their attitudes toward housing," he says.

-- Frank Ahrens
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