Robert Shiller Sees More Housing Pain Ahead

The Yale economist who called the housing bubble says foreclosure-gate is sapping confidence and more home price declines are likely.

When it comes to calling bubbles, Yale professor Robert Shiller has a pretty good track record. He raised a red flag about Internet stocks just before the market crashed in 2000, and he called the housing bubble in 2006 -- again, just before prices tumbled. Now the co-creator of the S&P/Case-Shiller Home Price index says the foreclosure crisis is another chapter in the story of mistrust of financial institutions that was ushered in with the financial crisis and the recession. And with so little confidence in the housing market, he says, prices have further to fall. In an interview with Kiplinger, Shiller shares his views on how foreclosure-gate could lead to another bailout, why the housing market won’t recover in 2011, and why he sees a good chance of a double-dip recession.

KIPLINGER: How much of an issue is the foreclosure fiasco for the recovery of the housing market and the economy? Does this go beyond a paper-processing problem?

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Jennifer Schonberger
Staff Writer, Kiplinger's Personal Finance