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Gary Shilling: House Prices Will Now Drop Another 20%

Last October, when everyone was jubilant about the housing "recovery," Gary Shilling of A. Gary Shilling & Co., predicted that house prices would fall another 20%. In the five months since, house prices have resumed their decline. In his most recent research note, Gary sticks by his "20%" decline prediction. We've included a summary and updated charts from his argument below. Last spring, many believed that not only was the housing collapse over but that a robust rebound was underway. Investors were crowding into foreclosed house sales and bidding up prices in California, often the bellwether state for new trends. The tax credit of up to $8,000 for new homebuyers that expired in April spurred buyers and promised to kick-start housing activity nationwide. TheHomeAffordable Modification Program was trumpeted by the Administration to help 3 million to 4 million homeowners with underwater mortgages by paying lenders to reduce monthly payments to manageable size and then paying homeowners to continue to make those payments. But then a funny—or not so funny—thing happened on the way to housing recovery...

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