Gary Shilling, author of the Age of Deleveraging, and President of Gary Shilling & Company, says there is another recession looming on the horizon, and at this point, it will be irrelevant what the Fed does next.
"Economic growth here and abroad is slipping, making a 2012 recession a distinct possibility," writes Shilling, in his July newsletter. And, "when you have slow growth it doesn't take much of a shock to throw you in negative territory."
'Another leg down in housing,' will be the shock that precipitates the next economic decline, as the Fed has been unable to recessitate this asset class. Shilling's forecasts are known for being generally bearish, but much to his credit, he was among a very small number of economists who foresaw and correctly predicted the jeopardy of the subprime mortgage market, and the destructive effect it would have on the broader U.S. economy.
Shilling's research highlights that a huge excess inventory is the 'achilles heal' in the real estate market. His estimates show there are 2 million to 2.5 million excess homes in the country - roughly 4-5 years worth of slack. In the end, he predicts housing prices will fall another 20% and the proportion of underwater mortgages will rise to 40%, from a current level of 23%.
On that basis, Shilling says a recession is "coming to a town near you."
Source: Yahoo Tech Ticker, July 14, 2011
