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Calling a bottom to the housing market is risky business

Posted by Scott Van Voorhis May 3, 2010 09:31 AM

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There is no sense right now in calling a bottom to the housing market.

Yet why are more than a few economists and housing market observers - who should know better by now - doing just that?

Karl Case of the Case-Shiller gang does wonderful work, but he called the bottom of the housing market late last year and he's sticking with it.

In fact, Case, who I caught up with last week, is predicting a return to the relative home price stability that took hold after the last major housing downturn bottomed out in the early 1990s. As the now retired Wellesley College economist looks at what's ahead for today's housing market, he points to a stretch in the mid-1990s where there were minor fluctuations in prices up and down but no clear movement either way.

By contrast, Robert Shiller insists it is still too early to say the housing downturn has finally bottomed out.

I lean more towards the Shiller rather than the Case side of this argument. A recent online poll, who knows how accurate, says consumers are also cautious as well.

Sure, there are some hopeful signs out there, including an economy that appears to be picking up. But that is balanced with a host of other reasons for caution - rising foreclosures and still high unemployment chief among them.

But here's the biggest and most obvious reason not to call a bottom yet - the just expired home buyer tax credit.

Sure, we can argue all day exactly how much of an impact the tax credit had on sales, but it appears to have been a significant factor in the recent spring mini-surge in sales and prices.

Just check out the press release sent out by Case-Shiller and S&P on their latest numbers.

The very cautiously worded release points to a relative improvement, noting that in several top metro areas across the country, the pace of decline had slowed.

Yet the release also strongly states that the reason for the improvement can be found in the home-buyer tax credit. (Thanks to Marcus for pointing this out.)

Here's a link to the release - the paragraph at the end says it all.

This blog is not written or edited by Boston.com or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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