Robert Shiller believes housing could fall another 10-25% before we finally reach a bottom. Housing nationwide is back to its March 2003 levels. Since this situation was so unique, it’s impossible to forecast the future with any certainty. Data from 1890 to 1990 shows that housing costs were about the same during this span in real terms. The last 20 years have been unlike any other in history.
A key question going forward will be whether or not we fall below the long-term average valuation (which is usually the case following a bubble). In every other crash throughout history, asset prices went from being vastly overpriced to being extremely cheap before the cycle was completely over.
Shiller also said that we need new financial innovation to make the financial system more stable. Unfortunately, the financial innovations of the last 20 years only made the system less stable.