October 20, 2018

What will the Housing Market recovery look like?

We are beginning to hear about a Housing Market recovery in the Media. We have heard stats that indicate that in some markets home prices have begun to rise and also in some areas of the country new construction starts are up. Great News, news many of us have been waiting for. So is it possible that the Housing Market has begun to stabilize and that a recovery is just around the corner?

According to Professor Robert Shiller, Yale University Economist and Co-Author of the Case-Shiller Housing Index, there is indeed optimism that we are seeing the seed of a turn around in the Housing Market. However, Professor Shiller’s interpretation of what that recovery will look like may be a little different than what most of us would like to see. Professor Shiller has compiled data that plots housing prices from 1900 to approximately the end of 2011.

To cut to the chase, the housing boom of the late 1990’s which ended in 2006-2007 was a result of the banking industry and Wall Street manipulating the housing market through the use of loose lending practices and risky mortgage based investment funds. As a result, the increase in housing prices was a departure from the norm as seen in Professor Shiller’s 100 History of Housing Prices.

 Professor Shillers opinion is that a recovering Housing Market does not mean a recovery to 2006-2007 prices. It will look more like a move towards a balanced market, more Buyers and fewer homes for sale, which will result in a slow, steady growth in prices over a longer period of time. This will mean sustainable growth in home equity based on consumer demand. Not the news that some homeowners would like to hear but at least this outlook should add some level of confidence in the market for First Time Buyers.

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