When the housing market cratered in 2007-2008, pulling the banking sector down with it, the U.S. economy fell into recession. Five years later the recession is over and housing has recovered.
Consider these markers:
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Homebuilder confidence breached the key 50-level mark in June—for the first time in seven years—indicating that builders have turned optimistic about the market.
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New home sales are up 29% from a year ago, and existing home sales – for April—hit a three-year high.
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Home prices continue to climb. The benchmark S&P/Case-Shiller home price index posted its biggest gains in seven years, and compared to a year ago, the the median sales price for new homes are up 15%; and for existing homes up 11%, at $271,600 and $192,800, respectively.
Related: Are Homebuilders Holding Off Construction to Game Rising Prices?
Even the Fed is becoming more optimistic about housing. Its latest monetary statement, issued Wednesday, says housing has “ “strengthened further.”
But economist & investment adviser Gary Shilling says the housing rebound is a “precarious recovery because it is based on rentals. It’s not based on new homeowners” who “are the basis of any solid rally.” Even many buyers, says Shilling, are making purchases just to rent homes, not to live in them.
Related: Largest Gains for Home Prices in 7 Years, Forget Bubble Talk for Now
And, says Shilling, founder of A. Gary Shilling & Co., “Home ownership is declining.”
The Census Bureau reports a 65% national home ownership rate for the first quarter—the lowest in almost 18 years.
“People worry they don’t have the incomes, can’t meet the lending standards… and people realize now for the first time since the 1930s that house prices nationwide can fall.”
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And now they have to contend with rising mortgage rates. Rates for a 30-year fixed loan just topped 4% for the first time in a year, causing mortgage applications to decline.
If you're considering selling or buying a home, watch the accompanying video to hear what else this seasoned economist has to say about the future of the U.S. housing market.
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