There aren’t too many reasons to be pessimistic right now about the housing market. Yet less than 25 percent of surveyed analysts think that happy days are here again for the housing sector, according to one poll.[1] The main qualms of skeptics right now, according to a prominent liberal community blog, are economic indicators that don’t take inflation into account; a purportedly regional recovery; and low inventory.[2] Other publications worry that the Federal Reserve, and bullish investors, are propping up the market.[3][4] This is really just a lot of bubkes.
The latest 20-city Standard & Poors/Case-Shiller home price index beat estimates (10.2%), showing a 10.87% year-over-year rise in housing prices for March.[5][6] In 12 of these cities, of which all had growth in the last three months, housing prices rose by double-digits.[7] Now housing prices are back to 2003 levels, with the similar national data taken into account.[8] Despite some honestly irrational prices (in wealthy areas, nonetheless), some people think that housing prices in many markets still seem cheap.[9][10] And some prices, like in New York, actually fell.[11] With prices 27% below their peak, calling this recovery a bubble is really premature.[12][13][14]
So are these numbers real? Yes. First off, inflation averaged under 3% from the boom (2006) to right now, and that doesn’t really throw the numbers off too much, at least for the purpose of this post.[15] That aside, the number of first-time home buyers are slightly downticking; but the number of foreclosures are actually in free fall.[16][17] Moreover, inventory is rising and distressed (underwater) home sales are dropping — thus, that whole investor-fueled madness theme falls flat under basic scrutiny.[18] It is also worth noting that consumer confidence just hit a five-year high.[19] If anything, this makes the case for the Federal Reserve to taper QE3, not end it.