Robert Shiller in the NY Times says don’t get too excited about this housing recovery:
Much hope has been pinned on the recovery in home prices that began about a year ago. A long-lasting housing recovery might provide a balm to households, mortgage lenders and the entire United States economy. But will the recovery be sustained?
Alas, the evidence is equivocal at best.
The most obvious reason for hope is that, unlike stock prices, home prices tend to show a great deal of momentum.
Shiller also argues prices might fall:
Consider some leading indicators. The National Association of Home Builders index of traffic of prospective home buyers measures the number of people who are just starting to think about buying. In the past, it has predicted market turning points: the index peaked in June 2005, 10 months before the 2006 peak in home prices, and bottomed in November 2008, six months before the 2009 bottom in prices.
The index’s current signals are negative. After peaking again in September 2009, it has been falling steadily, suggesting that home prices may have reached another downward turning point.
