The housing market within the metro areas in the United States is improving according to Yale University Professor Robert Shiller, co-founder of S&P/Case-Shiller property-value indexes during a recent radio interview with Bloomberg’s Tom Keene.
Shiller states that the best performers were glamorous cities such as San Francisco, Seattle and Miami where jobs and lifestyle are attracting wealthy investors and young professionals. He explained that people’s “speculative fervor” is coming back.
This is a surprising statement for someone who had been bearish on housing before the crash began.
Shiller details the increase in the annual rates of home prices in various cities for the past three months ending in April; San Francisco rose by 16, Phoenix 26 percent, Seattle 12 percent, Tampa 11 percent, San Diego 8.3 percent and Miami 8.2 percent.
Chris Rupkey, chief financial economist of Bank of Tokyo-Mitsubishi UFJ shares Shiller’s view that the real estate market in East Coast and West Coast are generally more appealing to home buyers. In addition, Rupkey explains that the improving state of the housing market in the key metro areas is due to mortgage rates of 3.5 percent.
The National Association of Home Builders (NAHB) index indicates signs of the housing market recovery in 84 metropolitan areas in the country this July. According to NAHB chief economist David Crowe, 11 new markets were added to the 73 cities that were already improving since June. Some of the newly improving metropolitan housing markets include Prescott, Ariz.; Springfield, Mass.; St. Cloud, Minn.; and Houston, Texas.
Crowe pointed out that the housing market is showing signs of a sure but slow growth, which according to him is encouraging despite reports that the broader economy is weakening.
However, the oddity here is that housing is practically the only sector showing any signs of improvement. All other indicators; job growth, manufacturing, inflation etc. are pointing to a possible recession.
With the election campaign heating up, President Barack Obama has vowed to raise taxes on people making over $250,000 a year. Economists across the board think that it is a bad idea to raise taxes during a slowdown/recession. However, Obama is trying to gain traction with the base.
It therefore looks like the good housing numbers will only be temporary. It is close to impossible to have a robust real estate market, while the rest of the economy is growing extremely slowly or contracting. It looks like things will only get worse. Obama has shown he only cares about re-election. Over the past few years, Europe has had over 20 summits and the problems seem to be getting worse. China looks as if it is on the verge of a total meltdown.
Housing prices will likely not see a bottom any time soon.
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