Written by Richard K. Green, Director, USC Lusk Center for Real Estate
WHAT should we conclude? Given the abnormality of the economic environment, the sudden turn in the housing market probably reflects a new home-buyer emphasis on market timing. For years, people have been bulls for the long term. The change has been in their short-term thinking. The latest answers suggest that people think the price slide is over, so there is no longer such a good reason to wait to buy. And so they cause an upward blip in prices.At the moment, it appears that the extreme ups and downs of the housing market have turned many Americans into housing speculators. Many people are still playing a leverage game, watching various economic indicators as well as the state of federal bailout programs -- including the $8,000 first-time home-buyer tax credit that is currently scheduled to expire before Dec. 1 -- in an effort to time their home-buying decisions. The sudden turn could signal a new housing boom, but is more likely just a sign of a period of higher short-run price volatility.
My take is different: I wonder if we have actually seen a sudden turn. The mix of sales has recently included fewer distressed sales. If distressed sales are fundamentally different from others, changes in the mix will influence the index. I suspected before that prices for non-distressed transactions before fell somewhat less than CSI; for the same reason, they may not be rising quite as quickly as CSI now.
Richard, do you imply that we are at "the bottom", and housing prices, on a SAAR basis and filtered for short-term noise, are back in business?
If so, how would you square this sentiment with the significant shadow inventory in REO, foreclosure, and pre-forclosure homes, along with the disturbing trends in high-value housing? Combined with headwinds on the broader economy and the fact that we still aren't at historical long-run averages for various price ratios (rent, income), I fail to see the reason for significant optimism in the single-family market.
This increase in prices is a temporary thing.
Nice post. The profit gain from real estate is enormous but on other side those who really wants to buy a house gets hurt