The economy at large is strengthening and consumer spending has increased, but the housing market has not bounced back. House prices have declined for a 6 straight month in the top 20 leading cities. Prices stabilized between spring 2009 and summer 2010, but are dipping once again.
According to the article, why are home prices dropping? Conservative attitude or the overall economy?
Does this agree or disagree with what we learned in Forclosure Nation?
http://www.pbs.org/newshour/bb/business/jan-june11/housing_03-29.html
From a basic supply and demand view of the situation. Around 13% of houses in the U.S are vacant. This makes a strong argument for excess supply. Likewise, with million of Americans losing their jobs and lending restrictions tightening the demand for homes has decreased. As supply increases and demand decreases price decreases.
ReplyDeleteI read an article that argued housing prices will not stabilize for another 5 years. While I am no expert on predictions such a disparity between supply and demand would suggest the market will not equilibrize for sometime.
I agree with Shiller, a big reason the housing market isn't bouncing back like the rest of the economy (bouncing back may be too strong) is because people are being more conservative about real estate purchases. One important aspect Shiller neglects is that not only are buyers being more cautious but so are lenders. What became known as subprime borrowers no longer have access to loans they need to buy a new home. As Olefson says, a large cause of the downfall of the bubble was that these borrowers were given loans in the first place just so lenders could make more money.
ReplyDeleteI believe people will become more sure about the market as time goes on. The market won't be back to where it was, but the desire for home ownership still exists for many Americans, demand will return slowly but surely. I do agree with Chris though that it may not be anytime soon.
http://www.doctorhousingbubble.com/5-reasons-falling-home-prices-good-for-economy-corporate-financial-profits-30-percent-of-economy-owners-equity-evaporated/
ReplyDeleteThis article talks a lot about housing prices and how it can be good for the economy. So it would be nice to compare both articles in regards to the housing prices.
Here are the reasons:
Reason #1 – As real estate values inflated actual owners’ equity plummeted
Reason#2 – Real estate should not be the primary driver of the economy
Reason #3 – The brunt of the recession has been shouldered by households
Reason #4 – Not everyone benefits from a housing bubble
Reason #5 – Negative equity is a drag on the economy