The Real State of the Real Estate Market

• E-mail Terry Keenan

One of the more puzzling aspects of the current housing recession is the amount of airtime given to the folks who helped get us in this mess in the first place.

You know the names: starting with Angelo Mozilo, founder of Countrywide Financial and the tan man of sub-prime land. After cornering one-sixth of the U.S. mortgage market — much of it by lending to people who shouldn't have gotten a loan in the first place — Mozilo now regularly pops up on tube, opining on the state of the housing market as if he were a modern-day Walter Wriston.

It's like having O.J. Simpson give the nation a civics lesson.

Mozilo, I assume, might even blush a bit himself, if he wasn't regularly bested in the shameless promotion department by Alan Greenspan. Last week Greenspan was everywhere, defending his decision to encourage millions of Americans to take out variable mortgages in 2004, even while he was about to embark on a huge interest rate-raising campaign.

Even Barbara Walters poked fun at her old boyfriend, scoffing at Al's real estate record on The View this week. Walters recounted how Greenspan convinced her not to buy a Fifth Avenue apartment in the mid-70s because it was a "bad investment."

No wonder the average homeowner is confused. That's why when I want to really know about the real state of the real estate market, I want to hear from someone who has been predicting this whole debacle for years now — a spot-on observer like Robert Shiller of Yale University.

Shiller is in no need of reputation repair. Not only did he warn of the housing mess, he also called the Internet bubble with remarkable precision in his book, "Irrational Exuberance." Call him a pessimist, or just downright prudent, either way Schiller has been right on the money.

So what is Shiller saying now? Well, while Alan Greenspan was out peddling his memoir this week, and Ben Bernanke was slashing rates, Shiller was testifying before Congress and making some sobering predictions that got virtually no attention in the press.

In his remarks, the Yale professor warns of fresh shocks ahead for the housing market and for the financial system. Indeed, Shiller believes that "the collapse in home prices might turn out to be the most severe since the Great Depression." As Shiller notes, declines in the value of residential real estate have been a factor in every recession since 1950. It's a little bit hard to believe that the deflation of this housing bubble will be the exception. He also believes that Fed rate cuts alone can do little to alter the negative psychology of homeowners sitting on a depreciating asset.

Perhaps Shiller's crystal ball is foggy this time around. The stock market performance last week seems to indicate millions of investors think so. But for my money, I’d far rather listen to real estate advice from the good professor than from the likes of Greenspan, Bernanke or Mozilo.

Terry Keenan is the anchor of "Cashin' In" and is a FOX News Channel business correspondent. Tune in Saturdays at 11:30 am ET, and find out what you need to know to make your money grow and keep what you already have!