Home Prices Keep Rising
A quick note:
US home prices, as measured by the Case-Shiller index, rose again in July – the latest month for which there are figures. The increase, an annualized rate of 1.6%, was sufficient to push the year-on-year gain to 1.2%, and was the fourth month in a row of increase. More good news was that the gain was nationwide. All twenty of the large metropolitan areas that comprise the index saw an increase. This too continued a trend: it was the third month in a row that gains had been that widespread.
It appears that many consumers now feel comfortable enough with their debt to income ratios, job security, and income prospects to to make what is obviously a very large commitment. Their re-entry into the market has boosted both new home and resale sales, reduced inventory overhang, and put a floor beneath the real estate slump. Prices now reflect the beginnings of recovery. The steady working through of foreclosures has also lifted prices: transactions taking place now are more likely to be voluntary sales and thus more reflective of sustainable market conditions.
A word of caution: prices are still about 30% below the bubble peak, and this recovery is both slow and susceptible to reversal if general economic conditions don’t continue to improve. Real estate can hardly be thought of as a strong contributor to the economy. It was an oversized contributor to what little employment growth we experienced during the Bush administration, and will be undersized as a result for a long while yet.
Nonetheless, we are lifting away from the floor. That we ought to be grateful for.