Housing is back, but be cautious
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