Shiller Says Government Support Is Tied to Housing Recovery
Posted By thestatedtruth.com on February 23, 2010
By Timothy R. Homan
Feb. 23 (Bloomberg) — Stabilization in U.S. home prices that may lay the foundation for a sustained recovery in the housing market is tied to government incentives to bolster the industry that precipitated the worst recession since the 1930s, said economist Robert Shiller.
“The rebound in the housing market since April seems to be related to these efforts that include a homebuyer tax credit and Federal Reserve purchases of mortgage-backed securities designed to hold down borrowing costs, Shiller, co-creator of the S&P/Case-Shiller home-price index, said in a Bloomberg Television interview.
The previous housing slump, in the early 1990s, coincided with an economic downturn and did not rely on government intervention to spur home prices, economists said. This time around, homes are becoming more affordable in part because of government programs, while the U.S. struggles to create jobs as it emerges from the worst recession since the 1930s.
“The recovery, to the extent that we see it, is still nascent and is absolutely being supported by the tax credit, said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia. The housing recovery really does depend on the speed of recovery in the overall economy.
A sustained rise in home prices faces hurdles that include a weak labor market and the expiration of government programs in the first half of the year. Rising foreclosures, many stemming from owners who have lost their jobs, also pose a threat to the housing market because more delinquencies may discourage some builders from beginning construction.
“The recoveries we’ve seen before in housing have occurred coincidentally with rises in employment, Wachter said.In this recovery, stabilization is occurring prior to the peak in unemployment, so that’s a big difference.
To help ensure the housing market doesn’t weaken again, President Barack Obama in November extended a tax credit of as much as $8,000 for first-time homebuyers and expanded the program to include some current owners for contracts signed by April 30.
“It’s really hard to use historical precedent, especially now, to predict what’s coming, Shiller, whose index has data going back to 1987, said on a conference call with reporters after today’s report. It’s really ambiguous right now as to where this market is heading.
More at….http://www.bloomberg.com/apps/news?pid=20601110&sid=anVuVl_umVFQ
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