Housing prices

Yesterday we got the Case-Schilling housing report and it showed that in most parts of the country housing prices either held their own or went up a bit from May to June.

Now the increases weren't dramatic and prices are still down from a year ago (can't imagine that should surprise anyone) but if prices have stopped going down month to month in most places and stabilized or gone up it would be a very positive sign.

Now most analysts do see it as a positive sign but of course they are all hedging their bets and some are completely discounting it.

The main arguments you hear or read about why it doesn't mean much include:

- Prices are still down since last year
- The houses being bought are foreclosure houses
- The buying is artificial because of the $8,000 Government stimulus for first time buyers
- Many of the houses are being bought by speculators trying to turn a profit
- This is only a pause and the descent will begin again as unemployment continues to rise
- There are many houses where the owners and/or the banks have not put them up for sale because of low prices.

Now, some of these statements are clearly factual and a couple are suppositions. The one about additional foreclosures and price declines coming as unemployment rises is the most speculative and would require the economy to have a second dip. Of course this is possible but based on most current indicators just doesn't seem very likely in the near term.

The fact that prices are down from last year is true but not sure what it matters. If prices rise at a very slow pace from here, by next June, we will see prices being higher year over year. It is both unlikely and probably undesirable for prices to escalate at too high a pace. We just got out of a housing bubble and once prices bottom, as they very well may have, we simply want to see them increase in line with the economy as a whole.

Yes the Government housing stimulus is likely have an impact and the question has to be will buying continue after it ends. That is a fact that won't be answered until it ends but the hope is that by then, the economy will be improving enough on its own. It is also very possible that the incentive may be extended or even revised to include all buyers. Time will tell.

If speculators are buying the houses with the hope of turning a quick profit or turning them into rentals with the hope of long term capital appreciation, I'm not sure why this is a bad thing. We certainly wouldn't want to see a speculative frenzy leading to another bubble but investing i housing, flipping houses or renting out units seems like a sign of recovery rather than anything else.

Yes, a lot of the houses being sold are foreclosures. Makes sense since they are the lowest houses out there and why wouldn't they sell first? Once again, we clearly want to get these houses back into the marketplace. What would be the alternative to selling them?

The fact that people are not putting houses up for sale because they are hoping for prices to rise is another fact that may very well be true and may act as a damper on prices since they will put houses up for sale as prices rise increasing supply. However, this will only happen if prices rise and will help avoid potential bubble conditions. Not a terrible thing.

Of course for those folks who are convinced, or possibly just desirous of a true economic catastrophe, nothing will convince them things are getting better. For most of us the fact that housing prices were stable month over month is good news, although we need a few more months of increases to see a true trend.