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

Posted by Unreasonable in Matters Financial.
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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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