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Housing prices may not have reached the bottom.
According to many economists, the economy is on the road to recovery and the housing market is on the rebound after home prices in the U.S. rose for the third straight month in July. However, according to economist Nouriel Roubini, the economy is not out of danger yet and U.S. housing prices may still fall more than 10 percent.
Roubini, who earned the nickname "Dr. Doom" for his continued dire warnings about the economy, warned of a housing bubble in 2005 and was one of the few economists to accurately predict the financial crisis.
According to Roubini, massive losses on $2 trillion of outstanding commercial real estate loans will make the problems worse by increasing pressure on the economy. Additionally, banks will be forced to raise more capital when the writedowns occur and the losses are recognized due to the fact that they have the loans on their books at face value.
As I have reported in a previous article, the commercial crisis is one that many people have chose to ignore despite continued evidence and warnings of its impending failure.
"The stress is moving from residential mortgages that are still in deep trouble, to commercial real estate, where they are just starting to recognize that they're going to have massive, massive losses," Roubini told reporters at the World Economic Forum.
Despite the news, Roubini estimates only a 20 percent to 25 percent chance of a double-dip recession and a greater chance of a U-shaped economic recovery in developed countries.
"If it's a U-shaped recovery, China, Asia, and emerging markets will do fine. If there is a double dip, the consequences will be severe for everybody."
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