Roubini: Further 20% decline in home prices

NYU economist Nouriel Roubini predicts a 20% decline in home prices over the next year-and-a-half:

With “deflationary forces” lingering for as long as three years, Roubini said U.S. government bond yields were going to remain relatively low and that American house prices would fall as much as 20 percent more in the next 18 months. While the dollar will benefit as investors seek safe havens, it will ultimately decline as the U.S. trade deficit has to shrink, he said.

The need for governments to issue more public debt to fund stimulus and bank-rescue packages risked more downgrades to sovereign debt and the failure of more government auctions as happened in the U.K. yesterday, Roubini said.

Roubini predicts 2-year recession

NYU economist Nouriel Roubini predicts a two-year recession and a declining stock market.

The US economy is entering a two-year recession that will be longer and deeper than previously feared, said Nouriel Roubini, a well-known economist and professor at New York University.

"I believe we're going to have two years of negative economic growth," Roubini said on CNBC. "The last two recessions lasted only eight months each ... This time around this is going to be three times as long, three times as deep. This is going to be the worst recession the US has experienced since the 1980s."

A slowdown in global economic growth combined with continued problems in credit markets and housing will haunt the economy, Roubini said. ...

"I believe that the worst is still ahead of us. I think that the next few weeks and months are going to be negative surprises on the economy," he said. ...

"But we're going to have a severe recession. If this is going to be a two-year recession, that's not priced by the market. And there are significant downside risks for the stock market and credit markets in my view," he said. "Yes, we're going to avoid the Great Depression, we're going to avoid a 10-year stagnation. That's not going to be the case."

Notice that he predicts the worst recession since the 1980s, not the worst since the Great Depression. When economists say that this is the worst financial crisis since the Great Depression, many economically-challenged journalists incorrectly report that this is the worst economic crisis since the Great Depression. A financial crisis (affecting the financial system) and an economic crisis (affecting the broader economy) are not the same.

Cassandra

The New York Times profiles Professor Nouriel Roubini, who predicted our current economic difficulties.