Is Housing a Barometer for Economic Recovery?

By: Jill Schlesinger
Topics: Financial Decoder

It's amazing what qualifies for good news during the nation's longest post-War recession on record. Yesterday, the S&P/Case-Shiller Home Price Index for May indicated that after almost three long years, we're finally seeing the early signs of price stabilization in housing.

The report showed the first month-to-month gain in 34 months, with three-quarters of the areas surveyed showing improvement or steady prices. That said, it's important to have context. Housing prices are down 17% from a year ago and we're now at levels consistent with those of 2003--who said that home prices never go down?

Still, the improvement in prices follows three other pieces of housing news reported recently: June Housing Starts were up 3.6%, June Existing Home Sales rose 3.6% and June New Home Sales increased by 11%. Same deal with all of these reports--the general year over year looks ugly, but the month over month shows signs of life. One more thing: the margin for error on housing stats is huge.

Considering that housing and credit led us into this crisis, is it safe to assume that the recession is over and we're on the precipice of economic recovery? We won't know until the folks at the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) tell us so. The NBER is the official arbiter of the beginning and end of recessions. Last week, even econo-bear Paul Krugman said that the Dating Committee may find that July marked the end of the recession, which started in December, 2007.

Assuming that the recession ends, what does that mean for you? Even when the recession is "officially over," there will be some clear hurdles ahead:

* EMPLOYMENT: Job loss is tapering off, but new jobs will be hard to come by for some time, so don't get too cocky with your boss. Also, get used to your current salary, because wages will continue to stagnate until there is more significant growth in the economy.
* INTEREST RATES: Don't freak out when rates rise–the Fed will have to raise them in order to contain inflation. That said, lock-in fixed rates now and pay down credit cards as soon as possible.
* HOUSING: Although prices are turning, don't expect a return to the bubble years. If you need to sell, it may be better to do so while interest rates are low and the first time home buyer credit exists. For the same reasons, if you can afford to pull the trigger and buy, get busy!

Continue on moneywatch.com

(CBS)

This post originally appeared The Financial Decoder blog on CBS MoneyWatch.com. Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.

Jill Schlesinger
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Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.
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by katie-liz August 11, 2009 6:27 PM EDT: The uptick will start somewhere, be it housing, employment, or somewhere else. It won't be drastic, but will dip up and down until we finally see some sustained improvement. Educate yourselves by keeping an eye on the credible reports that relay accurate information. For the most timely and granular house price index in the industry check out: http://www.iasreo.com/ias360_update.html

Here's today's IAS360 release:

U.S. HOUSE PRICES KEEP CLIMBING WITH A 1.2% RISE IN JUNE IAS360

August 11, 2009- Integrated Asset Services®, LLC (IAS®) (www.iasreo.com), a leader in default management and residential collateral valuations, today released its IAS360 House Price Index (HPI). Based upon the timeliest and most granular data available in the industry, the index for national house prices moved ahead another 1.2% in June.

With June's gains--the fourth consecutive positive month--the U.S. housing benchmark advanced 2.7% for full second quarter 2009, virtually offsetting the 2.6% decline across the first three months of the year. The IAS360 HPI is still down 16.7% from its high in June 2007. Like May, all four U.S. census regions reported positive numbers for the month and in like order. For June, the Northeast was up 1.9%, the Midwest 1.8%, the South 1.2%, and the West 0.4%.; Reply to this comment


by quapawsix July 30, 2009 9:52 AM EDT: The propaganda ministry is working real hard to get everyone to believe things are getting better. I still do not see anything on what the real underlying problem is, and that is Good paying Middle income jobs.

No good paying middle income jobs = no economy 70% of the economy depends on the blue collar workers being able to buy boats cars trucks and other doodads. Wall street ain't even in the same world as the rest of us so who cares if they go under.; Reply to this comment


by debinok1 July 29, 2009 4:47 PM EDT: The only thing happening is the government is patching the bubble so they can reinflate it and send on to the next in line.

NEITHER PARTY has any intention of doing what needs to be done and STAND UP to the INDUSTRIES, CORPORATIONS, and LOBBYISTS. BOTH PARTIES continue to line their wallets for the future, when the bubble finally busts and there is no repairing it, they will be set and we will be sunk.

They are PUBLIC SERVANTS, HIRED to be OUR VOICE in Washington, INSTEAD, they are the voice of those INDUSTRIES, CORPORATIONS, and LOBBYISTS.

Nothing will change UNLESS WE MAKE IT CHANGE.

It is TIME to TAKE BACK OUR government.
http://www.thepetitionsite.com/1/are-we-confident-our-government-is-working-for-us; Reply to this comment


by John_Merritt July 29, 2009 4:24 PM EDT: ' Is Housing a Barometer for Economic Recovery? '

It used to be, but not anymore. Every recession, but one, since the 1940's, housing led us out of the recession. This time it is not the case. What we are seeing now is that home prices have fallen to such incredibly low levels, that investors 'around the world' are purchasing our properties.

When everything is said and done, there will be more foreign investment of our assets than there were before. That is not necessarily a bad thing, but whenever you have an absentee owner in any property, there is little pride of ownership. Many are essentially speculators and will wait for a turn, and we start the real estate bubble again. This time however it will take along time for that lofty gain.

Our banks have made it nearly impossible for the average middle income family to purchase that home, even with the incentives that are proposed. Banks have the money, but they are going for the 'gimmes'. Those are investments with LITTLE TO NO RISK and positive gains. It will be interesting to see where our money went, and how it was used.

Transparency is a word, not a term of reality.; Reply to this comment


by ibsteve2u July 29, 2009 1:03 PM EDT: Now factor in the trick the banks are pulling: Rather than let housing reflect a "free market", they are holding more and more of the homes they have foreclosed on OFF the market, artificially propping up the housing price floor.

This game is rigged.; Reply to this comment

by mysteryroche July 29, 2009 12:16 PM EDT

Yes, I agree. Without jobs, the recovery means nothing. Luckily, I have always been employed at well paying jobs but that doesn't mean I don't fret over the loss of this country's backbone. If we don't make products of any real value, how can we expect to survive in the long run. Sadly, I think this country is becoming a nation of couch potatos. Everyone is sitting around waiting for the government to do its next magic trick to keep things going by borrowing more money from the Chinese and Saudis. Doesn't everyone notice that we are borrowing money from the countries that produce a valuable product? Unfortunately, this illusion will eventually come crashing down. We got pretty close this time but it's only a matter of time...

Reply to this comment


by curse914 July 29, 2009 4:43 PM EDT: I wonder if the concept of the perpetual growth economic model has reached its inevitable end on a finite planet. Anyone want to tackle the question of unlimited growth? Is there such a thing as a sustainable economic model? Why is that 1.5 billion of the 6 billion people on this planet consume nearly 75 percent of all the resources extracted and we expect the remaining 4.5 billion can consume at this level?

Answer these questions and we will be well on our way to a solution.


by debinok1 July 29, 2009 12:11 PM EDT: The real question is "Who is buying these houses?" Is it families with stable jobs or is it realtors and corporations looking to make a profit when the economy recovers? The answer to that makes a HUGE difference in exactly how STABLE the economy is. Or is this just another fluff piece sent out to cushion tomorrow or the day afters BAD news?

Nothing has changed, everything that caused the economy to fall is still in place and if they reinflate the bubble without fixing the cause of the bust, it will only bust again, only next time it will be worse.

Time to take BACK our government.
http://www.thepetitionsite.com/1/are-we-confident-our-government-is-working-for-us; Reply to this comment