How Far Is U.S. From the Bottom?

Just look at this chart and things become clearer. Although some economists say turning point is in sight, it is only their wishfulness. From 2000 home prices had stuck out long-term level and kept going up till 2006. The spike had never happened in modern U.S. history, according to data dating back to 1890 that Yale University economist Robert Shiller compiled for the second edition of his book „Irrational Exuberance“.

Americans are now only a few meters behind the start-line of way to stormy fall. Home prices could sink an additional 25% over the next years, returning values to their 2000 levels in inflation-adjusted terms. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch, who until recently had expected a much smaller slide.

According to an analysis by Zillow.com, the real estate Web site, a further 20% decline in prices nationwide would mean that two-thirds of people who bought in the past year would owe more than their homes would be worth, meaning they couldn't take out cash if they wanted to.

Source: BusinessWeek