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A noted economist predicted Tuesday that the slumping U.S. real estate market could lead to bigger price drops than even those seen during the Great Depression, necessitating bailouts for millions of American homeowners.

"Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said," according to the Associated Press.

The Standard & Poor's/Case-Shiller home price index is thought to be particularly reliable because it measures the price changes of the same properties over a period of time rather than relying on a simple calculation of the median price of homes sold during any particular month.

"Home prices rose about 85 percent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Shiller said," according to the AP. "Many people became convinced that housing prices would increase 10 percent annually, a notion Shiller called crazy."

Many homeowners—particularly those with adjustable rate mortgages (ARMs)—are having a hard time making their mortgage payments, and foreclosures are rising. Between February 2007 and February 2008, foreclosure filings increased nearly 60 percent, according to RealtyTrac.

Home prices nationwide have dropped 15 percent since their peak in 2006
Home prices nationwide have dropped 15 percent since their peak in 2006
"Shiller, who said it's difficult to forecast prices, endorsed legislation proposed by Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., that would allow the Federal Housing Administration to back as much as $300 billion in mortgages for struggling homeowners," according to the AP.

The rising foreclosures are having widespread effects on the nation's housing market. "Renters in properties that are being foreclosed on are being evicted. Homeowners forced into foreclosure are becoming tenants again and driving up rents," according to the USA Today.

The average rent is projected to rise 5.3 percent in 2008, up from a 3.1 percent increase in 2007, according to the National Association of Realtors.

Also contributing to the rising average rental price is increased demand for rental units in urban areas. "Higher commuting costs have translated into growing demand for rentals that are near urban employment centers rather than in outlying suburbs," according to the USA Today.

In addition, rental demand is up overall simply because fewer people can now become homeowners thanks to stricter lending regulations. Lenders are now being more cautious in their lending practices, and many people cannot qualify for a mortgage, leaving them to continue renting.

"Each [foreclosure] costs lenders an estimated $50,000, on average, in processing fees, liquidation-sale price cuts and other costs, according to the Center for Responsible Lending," the USA Today reported.

The AP also reported that President Bush asserted Tuesday that the economy is merely in a "slowdown."

But even with house prices falling, fewer people can afford to purchase homes because so many costs are rising. Increasing rental costs, as well as rising fuel and food prices, mean that saving up for a down payment is getting harder and harder for potential homeowners. And the days of purchasing a home with little or no money down are gone.

Because, as Shiller said, "real estate cycles typically take years to correct," according to the AP, the U.S. may indeed see housing prices fall more than they did during the Great Depression.