More Good News on Home Prices

Today brings more good news on housing prices as they continue to rebound. Nothing great but they at least have apparently bottomed and that's a good thing.

Home Prices Rose in August says this:

"U.S. home prices rose in August, according to Standard & Poor's Case-Shiller indexes, offering another sign that the housing market is continuing to heal.

• Home Prices, by Metro Area

The Case-Shiller index of 10 major metropolitan areas and the 20-city index rose 0.9% in August from July. On a seasonally adjusted basis, the improvements were 0.4% and 0.5%, respectively. Only one area, Seattle, saw lower prices in the month, down 0.1%.

On a year-to-year basis, the 10-city index and 20-city index were up 1.3% and 2%, respectively. Only three cities saw declines: Atlanta, down 6.1%; New York, off 2.3%; and Chicago, down 1.6%.

Phoenix, one of the hardest-hit markets during the housing crisis, posted its fourth-straight month of double-digit growth, up nearly 19%.

"The sustained good news in home prices over the past five months makes us optimistic for continued recovery in the housing market," said David Blitzer, chairman of S&P's index committee. "Even as we end the seasonally strong home-buying period, the statistics are positive."

Demand for homes has continued to show some signs of stabilization as record low mortgage rates and improved job growth have pulled some buyers back to the market."

Summing Up

It's great that home prices have stabilized and are beginning an upward trend.

That said, we should anticipate that housing prices as adjusted for inflation, while now bottoming if not bottomed, aren't going to return to "normal" for a good long time, if ever.

People have learned, banks have learned and perhaps even some of the government knows best gang of politicians have learned that it's not a can't miss one way ticket to automatically higher prices and greater household wealth. 

And maybe we've all learned this as well: that what goes up (especially when prices and sales are heavily government subsidized with low interest rates, easy credit, mortgage deductibility, no money down, property tax deductibility, and Fannie Mae and Freddie Mac backed loan guarantees) will inevitably come down as the price bubble eventually bursts, which it will and which it did.

And that this will create havoc in households and the general economy for years to come, which it will and which it did.

Thus, while housing is recovering and will continue to recover, let's not expect the good old days to reappear anytime soon. And that will be a very good thing.

You see, the good old days in the housing market, all things considered, were really bad old days.

Thanks. Bob.