U.S. Economy At 'Risk' Of Falling Into Double-Dip Recession: Shiller

NEW YORK - Recent housing and employment data suggests the U.S. economy is at a tipping point where a double-dip recession is possible and home prices could have much further to fall, a veteran economist said on Thursday.

Robert Shiller said the recent uptick in unemployment is not yet enough of a sign as to which way the recovery is heading. But if unemployment continues to rise in the coming months, it could suggest another recession.

"Whether we call it a double-dip or not, I think there is a risk," Shiller told Reuters Insider in an interview.

Likewise, data showing U.S. home prices fell into a double dip in March could prove to be either a seasonal effect over the winter months or part of a downward trend.

"My gut feeling is we might see a continuation of the decline" in home prices, Shiller said earlier on Thursday at a Standard & Poor's housing summit.

He added that a 10 percent to 25 percent slump in real home prices "wouldn't surprise me at all," though he cautioned that was not a forecast.

Shiller pointed to the glut of unsold homes on the market and the large amount of homeowners under water on their mortgages as pressuring prices.

As for when home prices might bottom, Shiller told Insider that was unclear and it was possible prices could slide for 20 years.

"We've seen five years of decline already since the peak in 2006 and I don't see evidence that we're coming out of it," he said.

Shiller, known for warning about bubbles in the stock market and housing market, is also the co-founder of the S&P/Case-Shiller home price index. Last week the index showed single-family home prices in March slumped to lows not seen since March 2003, falling below the previous crisis-era bottom set in April 2009.

That report, along with other data, including grim jobs figures and a slowdown in manufacturing, suggested that the economic soft patch seen in the first quarter of the year could be more protracted.

Home prices had been supported last spring by a tax credit, but the housing market has struggled since the credit expired.

Sources told Reuters earlier this week that the Obama administration has grown increasingly frustrated with the country's struggling housing sector and is exploring ways to keep it from weakening further.

(Reporting by Leah Schnurr; Editing by Jan Paschal)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[wozzeck57]

05:36 PM on 06/12/2011

America is at the crossroads between heading to a South American style economy or a European style economy. With high unemployment and less people to pay taxes, the deficit will continue to grow. People will need to rely on government programs more than ever. With the Repubs planning to cut govt. programs and jobs , we are headed for disaster with higher deficits and a shrinking economy. Obama needs to use the bully pulpit to show what is at stake for the American people. One really good idea that he has would be to start a national bank for infrastructure improvements. It be privately financed and would be a way to bypass congress. Several repubs are for it....

[SharedGrowth]

11:46 PM on 06/11/2011

Whether it's a single or a double dip is not the issue - the economy, for most Americans, is declining, and it has been doing so for 30 years. The media and commentators seem to be forgetting that the popping of the mortgage debt balloon was not a a stumble in an otherwise healthy economy. The government across multiple administrations effectively conspired with the banks to hide a sick economy by injecting huge quantities of debt. The "financial crisis" was just the moment when that river of government-backed debt surfaced and became explicit. It was not a shift in the underlying problems. See www.sharedeconomicgrowth.org for an analysis, mostly posted before the crisis, showing how the underlying economic disease developed, and suggesting a concrete, simple plan that you can support to do something to cure it.

[spinotter11]

05:10 PM on 06/12/2011

Fanned, SharedGrowth. I think our situation has to hit rock bottom before any remedies will be effective, but I am grateful to you for the link, which at a quick glance looks like the kind of reforms that are needed. I will read it and possibly share it with others.

[fortressfountain]

10:58 AM on 06/11/2011

Who wants to buy a home when the republicrats want to make the states in contol of everything. With 98% of states under water-people will soon be paying higher state and local taxes. Laying off a few union workers will not help.
Where will the jobs come from?

[spinotter11]

05:11 PM on 06/12/2011

Is there any reasonable scenario under which most of us will be paying more in federal, state, and local taxes? I don't think so.

[enviro1]

05:58 AM on 06/11/2011

Ever see the movie "the abyss'...where the guy has to find the nuke at the bottom, and he goes off the cliff, falling for what seems like forever....it's cold, dark, lonely...and then there's just nothing but him and the nuke at the bottom?....Well.....that's kind of like where we are....we're in the economic abyss....Only this time, I'm not seeing the lit up sea angels to come save us.......I'm seeing a bunch of morons in DC totally screwing things up. I've resarched this depression alot, from the fair housing act to where we are today....our government is pretty much 100% responsible for screwing this country up, both parties, along with corruption, greed and lobbyists......as many have said, how do you call this a double dip when the housing market never recovered in the first place......nor has the economy imo.

[Miss Muffett]

11:29 AM on 06/10/2011

Alright guys - my other comment was getting a bit cluttered with comments I couldnt respond to because the thread was full. But I have to say, I am abbhorrently shocked at how few people A. Own/ have owned a home and B. Understand the details of home ownership. For those of us who make our monthly payments on time, and in full every month, and do not wish to walk away from our homes (or cannot by State law) there are very few options. We MUST, absolutely MUST, reduce principal balances to reflect current fair market value. Every other attempt to fix the housing market is going to cost us money and fall flat. This is the ONLY option that will reset the housing market and provide a back-door stimulus for the economy.

[Realtors Are Liars]

07:56 PM on 06/10/2011

Wrong.

The "fix" for housing is to allow these grossly inflated prices to fall. You nor anyone else who bought a house during the Great Housing Fraud years of 1996-2010 can honestly and sincerely say that they were not aware that prices were (and still are) grossly inflated.

You made a tragic error. Get over it and get on with your life.

[spinotter11]

11:46 AM on 06/11/2011

You should start a blog and explain what happened to you to make you such an arch-enemy of realtors and the real estate myth/fraud. I bet a lot of people would be interested in reading it. I know I would.

[spinotter11]

12:57 PM on 06/11/2011

I did not necessarily mean that you suffered financially from realtors or the real estate myth. But obviously what you experienced affected you deeply. Such passion could fuel a good exposé, if you were so inclined. Give us some of the reality that made you feel this way. Just a casual suggestion. Keep up the good work. I notice very few comments that have anything to oppose to your remarks.

[El Chingaso]

03:26 PM on 06/11/2011

Miss Muffett, I think your point has some validity. Thank you for suggesting a very logical solution -- one that would benefit little people and not just bank-sters. (BTW, never mind the little fellow below -- "ssshhh"...he has anger issues.)

[Miss Muffett]

09:08 AM on 06/13/2011

lmao thank you! Its not like I'm the only one suggesting this solution -- its just me and all the other major U.S. economists. The thing about this solution is that it's a win-win scenario for both the banks and the homeowners. The banks can get their AR straight (banks borrow from the Fed Reserve against their AR) and eliminate toxic assets from their books, current homeowners aren't paying thousands of dollars a year without receiving any equity, and new home buyers have pricing that accurately reflects the current fair market value of the home making homes more affordable.

[strangiato]

11:19 AM on 06/10/2011

Commissars and pin-stripe bosses
Roll the dice.
Any way they fall,
Guess who gets to pay the price.
Money green or proletarian gray,
Selling guns 'stead of food today.
So the kids they dance
And shake their bones,
And the politicians throwin' stones,
Singing ashes, ashes, all fall down.
Ashes, ashes, all fall down.
Heartless powers try to tell us
What to think.
If the spirit's sleeping,
Then the flesh is ink
History's page will thus be carved in stone.
And we are here, and we are on our own

- pretty close to the mark for a bunch of Dead Heads - eh?

[beckjr2000]

10:25 AM on 06/10/2011

What nonsense! You have to get out of the first DIP before you can have a Second DIP!

[spinotter11]

11:49 AM on 06/11/2011

A recession is measured by GDP and GDP alone. By that measure we emerged from the recession two years ago. You know that. Whatever you think of the current economic situation, it is not a recession. The definition of a recession is clear and unambiguous - look it up. Why are people so tiresome?

[ConsensusReality]

08:28 AM on 06/10/2011

If there's not a double dip, it won't be because the Republican's didn't do their best to cause one.

[spinotter11]

11:53 AM on 06/11/2011

Fanned for that one. It isn't enough that we have a bunch of sociopaths in our financial summits, thinking crazy thoughts night and day about how to cheat us out of every penny. No, we also have to contend with sociopaths in our government who would rather see us all crash and burn than work with our president to bring some relief to millions of suffering Americans. What a cast of characters and how can we possibly escape unscathed?

[ILoveGreatDanes]

07:23 AM on 06/10/2011

Who are these economists, anyway? Listen to them: "May, might, can, possibly, etc. . ." I'd be just as good an economist as them. I can also say home values "might fall further." Why does it take their expertise to say that? Sheesh.

[Altario]

04:23 AM on 06/10/2011

Pfft... Don't worry about a double dip recession. The POTUS doesn't, so why should we?

[spinotter11]

05:12 AM on 06/10/2011

Don't worry, be happy.

[joyforjump1984]

02:38 AM on 06/10/2011

"Shiller pointed to the glut of unsold homes on the market and the large amount of homeowners under water on their mortgages as pressuring prices."

Thank you Fannie Mae and Freddie Mac. Enjoy that 90 million golden parachute Frank Raines.

[spinotter11]

05:13 AM on 06/10/2011

House prices need to come down to wage levels so that we can afford them. It's good that they are dropping - that's what happens after an irrational bubble.

[confuseddemocrat]

11:06 PM on 06/10/2011

problem is that wages are stagnant or are actually dropping..............

[David Hall 3]

01:35 AM on 06/10/2011

Here's an idea: maybe instead of handing wads of cash to the richest in the hope that they'll decide to be generous and spread it around building factories they don't need to produce products they cant sell to consumers who have no money left (because all their excess money is now in the hands of said richest), we should try stimulus that is bottom up, and tax the hell out of the top to pry loose all that asset hoarding so it can become circulated into the real economy again -- things that ended up having to be done during the last great depression, beginning in 1936 and 1937, after years of arguing and half-measures passed by Republicans who wanted to let people thrown out of their homes and off their farms rot in the streets.

[spinotter11]

05:14 AM on 06/10/2011

A winning strategy in the current Congress. Kudos.

[capn moose]

12:42 AM on 06/10/2011

Economists like to use terms such as "likely," "it could have a negative impact," and "I don't see evidence ..." Okay, so then why do we pay them and why do we listen to them. The government figures show that unemployment is sgtatic or getting worse, that under-employment is at an all-time high and that if one excludes forclosure and other "short sales," almost nobody is buying new or used homes as the prices are in the toilet. We are and have been in a Depression, not a recession. It will not end until a number of factors occur, and I doubt they will: 1) We bring the troops home from Iraq, Afghanistan, Germany, Japan -- and establish a rapid-reaction air-sea-land force here so we can cut the Defense budget; 2) We simply stop importing some things from China-- children's toys and clothes come to mind as so many times these are faulty and dangerous; 3) We stop the Bush=era tax cuts and we start a one percent acrosss the board income tax not matter how low or high your income is; 4) We invest or use tax-policy to force investment in air, sun, wind, water, nuclear, coal renewable and clean energy; 5) We end the war on drugs, turn enforcement into treatment and buy all the heroin, etc. from Afghanistan, etc. and use it to manufacture medicine, real pain meds; 6) Start single-payer health insurance. There's more, but why bother.

[spinotter11]

05:14 AM on 06/10/2011

Votes in Congress? I thought not.

[SlapMe]

11:34 PM on 06/09/2011

All you stupid people on here posting about republicans and democrats. Your goose was cooked long ago and there is nothing anyone can do about it. The economy will only get worse because there is no way to create jobs in any appreciable numbers in this country anymore. More of us will lose our jobs and our homes. We will run out of money and in an increasing number depend on others to supply money to us. We will have no health care and we will have no retirement because there is no way to pay for it. As a people we are defaulting on our debt at a record pace and as a nation we will have no other choice but to do the same.

[spinotter11]

05:17 AM on 06/10/2011

You are getting a little hysterical there. Yes, it's a downturn. No, it's not the end of the world. We had an exceptionally easy period there from 1945 until 2008. Practically no one alive in the USA has experienced a true depression. We may default - the sun will come up the next day. I would worry more about peak oil and especially global climate change if I were you.

[Maranda MassieGuthrie]

09:30 AM on 06/10/2011

no one alive, my grandma was alive during the great depression, as well as her siblings who are older than her, and my husbands 99 fluent grandmother..there are people still around..! You don't want to hear what they have to say, b/c then you will realize it is doom and gloom and that unless we revolt we are screwed..nothing is the same..and the GOP has and continues to take it to pre depression era..no unions, monopolies and to big to fails are back, income inequity is back. Minimum wage is way under inflation rates..so it's purpose to keep people out of poverty has failed. Lets not forget the attack on woman's rights, and the new push for lowering the standards of the child labor laws..Only this time is will be worse we do not have the housing and construction market to prop us up something that was bought paid and built for in America, we do not have the industry any longer, and we can not count on government jobs..we should be hysterical!

[LeftyLemming]

10:46 PM on 06/09/2011

Geez, I don't know how much more good news I can take !!!