Hous­ing is back, but be cau­tious

The Denver Post - - OPINION -

Home prices have — on av­er­age, across the na­tion — climbed back to the peak in 2006 where they sat be­fore the bub­ble burst and ev­ery­thing came crash­ing down.

We wanted to take a mo­ment to cel­e­brate the news that, like in Den­ver where hous­ing prices have been back to pre-re­ces­sion lev­els for a time, some of the more hard­hit ar­eas of the coun­try are bounc­ing back, too.

It’s a mo­ment of cau­tious optimism and tem­pered re­al­ism.

The S&P CoreLogic Case-Shiller Na­tional Home Price In­dex at the end of Novem­ber an­nounced that the av­er­age home price for Septem­ber was 0.1 per­cent above the record high in 2006.

Don’t break out the cham­pagne just yet, though. If you ac­count for the in­fla­tion that has oc­curred over the past decade, home prices are still 16 per­cent be­low that high.

That means many home­own­ers are just now able to say their home is worth what they paid for it 10 years ago. Den­ver reached that high wa­ter mark in May 2013 ac­cord­ing to Case-Shiller, and hous­ing prices have con­tin­ued to grow at a break­neck clip in the past three years, pric­ing out many home­buy­ers.

For other parts of Colorado, where job growth has been slower and home val­ues are just now reach­ing their 2006 lev­els, it’s less of a rev­e­la­tion.

We are glad to know that in places where there isn’t cur­rently a boom or a bust, things are get­ting back to nor­mal.

David M. Bl­itzer, chair­man of the in­dex com­mit­tee, noted in a re­lease from Case-Schiller that other hous­ing in­di­ca­tors are “giv­ing pos­i­tive sig­nals.”

Sales of ex­ist­ing and new homes are ris­ing and more homes are be­ing con­structed with an an­nual rate of 1.3 mil­lion units, which is a post-re­ces­sion high.

Some will see this slow growth and call for a lift­ing of reg­u­la­tions that came in re­sponse to the col­lapse of Lehman Broth­ers and other fi­nan­cial in­sti­tu­tions.

Imag­ine the growth, they’d say, if we made it eas­ier to qual­ify for a mort­gage, re­quired smaller down pay­ments, or if we less­ened bur­den­some reg­u­la­tion like re­quir­ing de­riv­a­tives to be housed in the same divi­sion as safer in­vest­ments.

But any tinker­ing with the safe­guards ought to re­mem­ber the havoc that brought them about.

There’s no doubt that the hous­ing pic­ture is also be­ing kept ar­ti­fi­cially rosy by low in­ter­est rates from the Fed­eral Re­serve. An in­di­vid­ual’s in­come can buy a lot of house at the mo­ment, as not much of the mort­gage is go­ing to in­ter­est.

Another con­cern: In­come isn’t keep­ing up with the price of hous­ing.

Ac­cord­ing to Bl­itzer, since 2012 homes have grown at 5.9 per­cent (ad­justed for in­fla­tion) and in­comes have grown by just 1.3 per­cent. Com­par­a­tively from 1975 to present day the hous­ing mar­ket grew by just 1.1 per­cent a year while in­come grew by 1.9 per­cent.

Bl­itzer says the trend since 2012 is “un­likely to be sus­tained.”

But as Bl­itzer and oth­ers have noted, psy­cho­log­i­cally, it mat­ters that we’ve re­gained the value in prop­erty that was lost when the hous­ing cri­sis hit. Whether it’s jobs re­ports or the hous­ing in­dex, con­sumer con­fi­dence in our econ­omy and grow­ing na­tion will keep our econ­omy mov­ing.

Ac­cord­ing to a re­port pub­lished last month, the av­er­age U.S. home price for Septem­ber was 0.1 per­cent above the record high in 2006. Seth McCon­nell, Den­ver Post file

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