Robert Shiller of Case-Shiller Says His Firm's Forecasts Are Turning Increasingly Pessimistic

The Robert Shiller interview yesterday with the Wall Street Journal gives us some insight to the bad housing numbers just released this week:

• Shiller admits this month's huge fall in prices caught Economists off guard. He says both Bloomberg and his firm poll Housing specialists and no one saw the pessimistic numbers just released for November coming.
• Shiller says that if this keeps up through December (numbers to be released in January 2011), the overall housing market will have lost another 10% or more for the year 2010.
• On one hand, Shiller says the latest downtrend in housing prices has only been in effect for the past few months, that a clear downtrend is not clearly seen.
• Still, Shiller admitted, "But if home prices continue on this pace down, I think the Economy has serious reasons to worry.
• "We just had six of twenty big cities we follow report new lows below the lows of 2009," points out Shiller. He believes the reason for that last plateau low in Spring 2009 is that in early February 2009 the US Government instituted the short-lived Homebuyer's Tax Credit. As he said, "That was a major turning point for the market. It suddenly turned up. And we saw price increases for much of 2009 . . . "
• Shiller speculates that there will more than six new lower lows out of the 20 cities he and Case follow in the coming months.
• He also expresses he though the 2009 Homebuyer Tax Credit was a good government stimulus but ponders, "How willing is Congress going to be to do it again?"
• Despite what is happening at this moment in housing, Shiller tells us some forecasters from his firm Macro Markets are predicting a rise in housing prices by 7% by 2014 (or three years from now). And yet, he admits, more of his forecasters are becoming increasingly pessimistic.