It’s pretty simple with housing…Remember Econ 101, Supply and Demand? Well, housing prices decline until people create more demand than immediate supply (foreclosures).
House Prices Still Have Another 10%-20% To Fall, Says Gary Shilling
Posted Jun 16, 2010 11:30am EDT by Henry Blodget
A year ago, house prices finally stopped collapsing after two years of brutal declines. Over the following few quarters, moreover, they actually rose. This led many observers to conclude that the housing bottom had been reached and that we were headed for a v-shaped bounce.Not Gary Shilling.
Gary Shilling, head of economic research firm A. Gary Shilling & Co., thinks house prices still have another 10%-20% to fall. Just as bad, Gary thinks this fall will happen over the next three years, meaning that house prices won’t bottom until 2013. Most people think prices have already bottomed, or will bottom later this year or next.
Why is Gary so bearish?
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There are growing murmurs that the same issues could start hitting us here in Canada, which is seeing record levels of consumer debt and high housing prices in all major cities. Sure doesn’t make me feel good as a home buyer, but I am glad I stuck to my rule of no more than 33% of net income, so whatever happens should not impact me too greatly.
You’re smart using the 33% mark. That will keep you out of harms way. Just keep in mind that may rise as prices fall. I’ve always slept better with a multi year emergency fund. It’s somewhat bullet proofed me from things I can’t ever see in plain day.