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Glimmers of Hope on Housing?

The Case-Shiller housing index saw a slight rise in housing prices last quarter. It wasn't a lot, but it's enough to spark some welcome optimism:

price-rent-cr.jpg

You could peer into this data and see troubling things, too: The tax credit that's currently spurring buyers into the market is expiring soon. A lot of the movement comes from first-time buyers who think the market is hitting bottom, and they probably won't continue. So this could reverse. Calculated Risk runs down some other reasons for pessimism.

But I come down more with Krugman's take, which is less that we're seeing a false dawn than a new normal. "At this point, squinting hard at various measures suggests that housing prices are still a bit high, but we’re within debating range. Home prices could stabilize not too far from here," he says. "But even if the big bust is over, that doesn’t mean we’ll see a rebound; at best, this is the new normal. 2005 isn’t coming back."

By Ezra Klein  |  August 26, 2009; 1:40 PM ET
Categories:  Solutions  
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Comments

"2005 isn’t coming back."

Thank everything holy.

Posted by: donovong | August 26, 2009 2:02 PM | Report abuse

Is that seasonally-adjusted? It's the summer "buying season".

One aspect of the tax credit for 2009 purchases is that it has an anti-flipper mechanism that's intended to keep first-time buyers in their new homes for at least three years. I don't know whether that's delaying a new bubble until 2012.

There's also a genuine question of shadow inventory -- foreclosures, sheriffs' sales, etc. that have been kept unlisted for long periods. Add to that the re-stratification of the market -- there's huge inventory in mid/high-end, and few move-up buyers. The people who are selling to first-time buyers at the low end aren't taking much equity (if any) from the sales. In many cases, they're doing a sideways refinance.

Posted by: pseudonymousinnc | August 26, 2009 3:44 PM | Report abuse

The backlog of "shadow" inventory is very real, but also very little discussed since it is difficult to accurately measure. Deutsche bank has the only numbers I've seen on this, but they're absolutely massive.

With peak ARM resets still looming, artificially low rates (that only have one way to go from here), government subsidies and shadow inventory, bottom calling is as much a fool-maker today as it has been for the last few years.

Posted by: slantedview | August 26, 2009 4:20 PM | Report abuse

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