It's a huge article, the kind you can't possibly miss, located on the front page of the nation's most significant business section -- an article that says the real estate market is headed down, down and down.

The speaker is Yale economist Robert J. Shiller and, says the Business Section of the Sunday New York Times, the well-regarded economist believes that home values in the U.S. are headed for a fall. (See: Be Warned: Mr. Bubble's Worried Again , August 21, 2005)

How much of a fall?

"He predicts," says the Times, "that prices could fall 40 percent in inflation-adjusted terms over the next generation and that the end of the bubble will probably cause a recession at some point."

The Times says that by using old classified ads, Shiller was able to chart U.S. home values going back to the 19th century.

"It all points to an unavoidable truth," reports the Times. Shiller has found that "every housing boom of the last few centuries has been followed by decades in which home values fell relative to inflation. Over the long term, the portion of income that families spend on their shelter stays about the same."

This would be fairly distressing news -- if the news itself was not so contradictory.

It's plain that real estate prices in some places and at some time must fall. That's simply the nature of commodities, the ebb and flow of supply and demand. And certainly such changes over the course of a "generation" -- maybe 20 years -- should not be seen as unusual. If you remember 1989, as one example, you can see how prices and sales were eroded during the past generation.

The idea that home prices are related to income makes sense -- you can't spend what you don't have. And surely many households are "house poor," devoting more of their income to housing costs than should be the case.

In a sense, then, the idea that income and home costs have a steady relationship over time should be comforting, especially if incomes rise. But what if incomes don't rise -- or don't rise enough?

The National Association of Realtors says that the median single-family home price was $218,600 in June, up 14.5 percent from a year ago. By every possible measure, wages have not kept pace -- which means home costs are rising relative to income so home values must fall.

Shiller's academic argument might be stronger if he did not buy a vacation home in 2002 -- after all, why buy if you think the value of an asset class is going to fall?

Shiller also tells the Times that "we do have a shortage of land in the prestige areas, and so there is a potential for them to go up."

In addition to wage declines, a more immediate concern is that mortgage rates may rise. Higher rates mean steeper monthly costs -- and that means less affordability and reduced demand.

For some time now there has been a looming sense that home prices across the country would generally fall. That hasn't happened. It's also true that interest rates have not risen appreciably.

What keeps home prices high and interest rates low continues to be a mystery -- especially at a time of soaring gasoline prices, vast federal over-spending and huge balance-of-payment deficits?

At the very least -- just in case -- it makes sense to hedge one's real estate bets and avoid adjustable-rate mortgages, interest-only financing and option financing with low start rates -- and potentially far higher-rates in the future.

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