THE END OF THE GREAT RECESSION? IS IT TIME TO CELEBRATE?

Breaking News: Case/ Shiller Housing Index Shows Second Month In A Row Of INCREASE IN SALES!

“The animal spirits seem to be coming back,” said Robert Shiller, Yale economics professor and developer of the Standard & Poor’s/Case Shiller Home Price indexes. “The psychology does seem to be changing.”

The national home-price index released on Tuesday rose for the second straight month in June, fueling hopes the housing downturn, which is in its third year, is waning. Still, the index was off roughly 15% in the second quarter from the year-ago period. See Economic Report.

In a teleconference Tuesday, Shiller was reluctant to call a definitive bottom in home prices, saying he’s seeing “conflicting signals” in the housing market.

Well then, I will do it. There is a clear bottom in most housing markets for homes that are less than $200,000. Will this last? I think it will. There first time buyers and investors out there that there won’t be any further significant value decreases for homes less than $200k. Now, with that said, if the ‘First Time Buyer Credit of $8,000′ is not renewed….and if the banks make the mistake of dumping too many foreclosures on the market too fast…all bets are off.

On the positive side, the rise in home prices in May and June is a “sudden break in momentum” from years of nearly steady, punishing declines that may signal a turning point. “The roller coaster is now going up,” Shiller said.

Yet he noted what appeared to be a housing recovery in early 2008 “fizzled” when prices resumed their decline. And a long-term chart of home prices makes it look like “we are still in the process of a bursting bubble.” Shiller expressed “great reluctance” to forecast where prices will go from here with the U.S. economy in the midst of the most severe recession since the Great Depression.

Where will prices go? There WILL BE more depreciation for the more expensive…non first time buyer/ Investor price ranges. In some cases this depreciation will be dramatic. We are predicting that the next wave of foreclosures will force the ‘upper end’ housing markets to lose as much as 30%+ over the next 12-24 months.

“Unemployment looks like a bad indicator for the housing market,” Shiller said.

There are other challenges that could snuff out the nascent revival in home prices. One of the biggest threats is the mounting wave of foreclosures as more strapped borrowers struggle to meet their monthly mortgage payments. The First-time buyer tax credit is set to go away in November, and rising interest rates could also dampen sales, economists say.

The First-time buyer tax credit is set to go away in November, and rising interest rates could also dampen sales, economists say.

IF they don’t renew the buyer credit then YES…we are in trouble. But, they will. And I bet they will increase the ‘$credit’ AND make it available to everyone.

Here is an interesting thought for you….the $8000 buyer credit created demand..in many markets there has been so much demand that agents are selling the less expensive homes in 24 hours. What has this in turn caused…competing offers and increasing prices. So, someone was motivated to buy a home because they were getting a ‘credit’ from the government…they may of thought..”heck yeah I will buy now…I will get $8000 in free money”. As a result of this prices are pushed up. Buyers pay MORE for the home than they other wise would have. So, their $8000 in free money is in essence wiped out by the increase in price they are paying….

Indeed, recent experience has taught homeowners that prices can be very volatile, said David Blitzer, chairman of the index committee at S&P, during Tuesday’s call.

On a national level, home prices are back to levels last seen in 2003, but the cities that saw the biggest run-ups also fell the hardest.
“The idea that they could never go down was wrong,” Blitzer said.
He added the data coming out of the housing market in recent months have been encouraging, but warned against breaking out the champagne just yet. Commenting on so-called shadow inventory, he said many sellers have been waiting for an uptick in house prices to put their homes on the market, Blitzer said. This could exacerbate the supply glut and push a recovery further into the future.

Source: MarketWatch.com