Worse than the Great Depression?

Wow, that title alone is pretty scary. A small post at the Wall Street Journal called Yale's Shiller: US Housing Slump May Exceed the Great Depression. Once in a while there are references and comparisons in the Main Stream Media (MSM)between the current bubble bust and the Great Depression, but this article's title makes the potential sound worse. Most of the MSM are struggling to call the affects of the Great Housing Bubble a recession.

Yale University economist Robert Shiller, pioneer of Standard & Poor’s/Case-Shiller home-price index, said there’s a good chance housing prices will all further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.

This of course is a national aggregate. Some of the areas featured in Super Bubble States the houses have dropped over 50%. Some areas will not fall as dramatically, since they did not rise as dramatially.

“I think there is a scenario that they could be down substantially more,” Mr. Shiller said during a speech at the New Haven Lawn Club.

Mr. Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct. Home prices rose about 85% from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Mr. Shiller said. “Basically we’re in uncharted territory,” he said. “It seems we have developed a speculative culture about housing that never existed on a national basis before.” Many people became convinced that housing prices would increase 10% annually, a notion Mr. Shiller called crazy.

Prices rose by 85% over tens years, rather than an inflation adjusted 30% - which will still leave an imbalanace of 55%. This means that basically to get back to average inflation adjusted appreciation levels huge price drops would need to occur. Significantly larger than the anticipated 30%. The economically lethal combination of inflation in food and gas with the lowering of property values, the forthcoming recession looks very bleak. As Shiller said this is "unchartered territory."