With the continued price gains seen in the S&P/Case-Shiller Home Price Indices, questions about a new housing bubble are bubbling up. The Sunday New York Times editorial page asks about housing and laments that the weak recovery and student loan debt are preventing potential home buyers in their 20’s and 30’s from helping the housing market. In the same issue Robert Shiller reports on a recent survey showing that expectations of rising home prices are common but bubble euphoria is not here.
The housing market is more complicated, and messier, than many people realize. There may not be a “normal” housing market. Rather the old comment about location location location does matter — not only will one city differ from another, but neighborhood to neighborhood matters. A glance at the latest S&P/Case-Shiller report or at the table in my previous post shows that the theme is not that all prices rise or fall together, it is the large variation across cities. Dallas and Denver set new highs — Boom? New York and Chicago are 20% to 25% down from their peaks — Bust?
Where does this leave the housing market? If you’re a buyer or seller, the answer is about where you’re buying or selling. National numbers may be interesting but won’t tell the story you’re looking for. For the economy the good news is that expectations of future prices are (somewhat) under control while home construction and sales of new homes are weak and not giving the economic recovery much of a boost.