by Calculated Risk on 4/22/2008 04:41:00 PM

From the WSJ: Yale’s Shiller: U.S. Housing Slump May Exceed Great Depression (hat tip hopeinsd)

Yale University economist Robert Shiller ... said there’s a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.

“I think there is a scenario that they could be down substantially more,” Mr. Shiller said during a speech at the New Haven Lawn Club.

Mr. Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct.

Historically housing busts take about 5 to 7 years from price peak to trough. If we date the current bust as starting in early 2006, the price bust for existing homes will probably last until 2012 or so. I suspect 2008 will see the steepest price decline, followed by a few years of smaller percentage declines in the bubble areas.

As of the end of 2007, the Case-Shiller house price index showed national prices were off 10.2%. I suppose this means Shiller is estimating prices fell 5% nationally in Q1. Very possible.

Of course according to OFHEO, house prices rose in February, and are only off 3.1% from the peak!

U.S. home prices rose approximately 0.6 percent on a seasonally adjusted basis between January and February, according to OFHEO’s new monthly House Price Index. For the 12 months ending in February, U.S. prices fell 2.4 percent. Since its peak in April 2007, the index is down 3.1 percent.

The OFHEO prices don't seem to fit with the price declines being observed in most markets.

Also, Shiller's forecast is in nominal terms; a 30% price decline in real terms (inflation adjusted) is very likely. Three years of flat nominal prices would be close to a 10% decline in real terms.