Housing market finally shows signs of improvement

Marketplace Contributor Apr 25, 2012

Tess Vigeland: There was something new in today’s latest economic outlook from the Federal Reserve. They added a brief, qualifying phrase to their chronically dismal view of the housing market. The central bankers now report “some signs of improvement.”

As our senior business correspondent Bob Moon reports, some economists are interpreting those four words as more evidence that the country’s long-struggling housing market has finally bottomed out.

Bob Moon: Don’t get your hopes up too much. Moody’s economist Mark Zandi says it could still take many years for prices to return to their peak of six years ago.

Mark Zandi: The crash is over, but we’re a long way from what you might call healthy or normal.

Indeed, despite their hopeful spin today, Fed policymakers kept the phrase they’ve been repeating month after month: “The housing sector remains depressed.” At Bank of Tokyo-Mitsubishi, economist Chris Rupkey thinks that’s relative.

Chris Rupkey: We’re depressed in terms of, you know, we’re not back to where we were, and maybe we don’t need to be at this point.

With the improving jobs picture and rising consumer confidence, Rupkey’s convinced housing prices will stabilize this year, and soon get back to more normal pricing growth.

Rupkey: Starting in 2013, they go up, say, 3 percent; 2014, 4 percent; 2015, maybe they go up 5 percent. So it slowly starts to rebuild here.

Wellesley College housing expert Karl Case — one of the names behind the Case-Shiller index — says prices are stabilizing because of a paradox: There aren’t enough homes to satisfy demand in the most desirable neighborhoods.

Karl Case: Sellers are dug in, and they’re holding out, because they know they’ve got something good that may come back in time.

Case says he’s more optimistic than his colleague, Yale professor Robert Shiller, who was quoted yesterday as saying he fears the housing market could languish for a generation. At the National Association of Home Builders, economist David Crowe also doubts that.

David Crowe: If you’re very, very ill, you don’t pop out of bed the next day, but I don’t think it’s going to stretch out over a decade, or even longer.

And Karl Case thinks there’s even hope for a faster turnaround.  

Case: I can tell you from looking at the data on home buyers, they get optimistic quite quickly.

He also admits, though, that the economy could change just as quickly.

I’m Bob Moon for Marketplace.

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