The Guardian's Moore: Housing Recovery Still a Sham

Wednesday, 30 Apr 2014 07:18 AM

By Dan Weil

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Heidi Moore, U.S. economics editor at The Guardian, didn't believe in the housing rebound story last June, and she still doesn't.

"People wanted to believe in a housing recovery," she tells Yahoo. "They saw rising prices as a sign that good times are here. But it's not that."

Home prices jumped 12.9 percent in the year through February, according to the S&P/Case-Shiller index of 20 cities. But new home sales plunged 14.5 percent in March, and existing home sales dipped 0.2 percent in the month.

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"The root causes [of the price increase] were that not enough homes were available, and those that were available were incredibly high-priced," Moore explains. "Simple supply and demand were out of whack."

While some analysts are blaming the brutal winter weather for the housing market's weakness during the past few months, Moore doesn't buy it.

"Weather has been blamed for a lot, and it's true it has some role. But there are so many other metrics that go in the direction of real trouble," she notes.

"People haven't been able to borrow for a mortgage for years. That has nothing to do with the weather."

While some believe the housing market is holding back the economic recovery, Moore thinks the opposite is true.

"It's the other way around. It's the economy that affects the housing market. . . . Low growth, low wages, stagnating employment and long-term unemployment are all reasons why people aren't buying houses, and those are economic issues."

Some housing analysts reacted positively to Monday's news of a 3.4 percent increase in pending home sales during March.

"The backdrop in general for housing remains reasonably positive," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, tells Bloomberg. "The labor market is improving, confidence generally has been edging up and mortgage rates are still pretty low."

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