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Gary Shilling Thinks Your House Might be Half Price Next Year November 19, 2006

Posted by Unreasonable in Matters Financial.

In his latest Thoughts from the Frontline, John Maudlin reprints Gary Shilling’s latest newsletter: What Will Collapse Housing Prices. Shilling has been predicting a 25% drop in prices next year, but he also lays out the case for a > 40% correction to return to historic valuation levels as shown in this chart:

Quality Adjusted House Price

Since valuation levels tend to overshoot the average when they correct, a 50% drop is in the realm of possibililty. This is a tour de force of what’s up with the housing market. It looks long, but it’s mostly graphs so it’s a quick read.

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