James B. Stewart asks Karl Case, co-creator of the Case-Shiller home price index, about the outlook for housing, and finds Case to be the opposite of bearish:
The 20-city composite index of home prices hit bottom in March 2011 and has improved modestly since. “Household formation is increasing and the vacancy rate is dropping,” [Case] said. “Housing starts are at a 60-year low, and they’ve been there for three years. That’s unheard-of. We’re starting to see some signs of an increase in value.”
But looking at a home like a stock or bond is probably the wrong approach. “If you think of a house as a consumer durable and you qualify for credit, it’s unbelievable how cheap housing is relative to previous years,” Mr. Case said. “Mortgages are cheap. If you’re buying a house or apartment to live in and pay for over time, and can afford the payments, then it’s a terrific time to buy.” [Emph. added]
This guy’s an expert, remember. . . . His points about the beneficial effects of lagging housing starts and accelerating household formation are especially insightful, in my view. . . .