The latest housing information indicates that home prices have
continued to make a slow and steady recovery. That's good news for
the economy in general, and specifically could help homeowners and
depositors in savings accounts. However, it should be a call to
action for potential home buyers, who otherwise could miss a rare
S&P/Case-Shiller Home Price Index rose in
, according to figures released on September 25. It's too early to
call this a rally, but then again, an orderly recovery in the
housing market may be better than a return to the runaway increases
of the housing boom.
Healthier than people think?
Overall, the housing market may be healthier than many realize.
The S&P/Case-Shiller Home Price Index has now increased for six
consecutive months. Certainly, prices are nowhere near back to
where they were during the peak of the housing boom, but that may
be an unrealistic -- and unhealthy -- target.
Looking longer term, the S&P/Case-Shiller Index is up about
40 percent from where it was in January of 2000. So, if you look at
the housing boom as an aberration, what you see is that housing
prices have still made solid gains over the long run. Ultimately,
modest price increases are much healthier for the housing market
than a steep hike in prices, which can freeze many potential buyers
out of the market and cause some actual buyers to get in over their
Action at the low end
The New York Times
reported last week
that recent progress in the housing market is primarily at the low
end. Prices in the lowest tier of the housing market are rising
faster than those for mid-priced or expensive homes. This too is a
sign of health: The lower end represents a much broader base of
homeowners than the middle or upper tiers of the market. That
signals wider support for the housing market, and for the economy
as a whole.
A fleeting opportunity
Good news for the economy might even translate into good news
for savings accounts and other deposits, which have seen interest
rates driven down to near zero by weak loan demand and Federal
Conversely though, the potential benefit to savings and money
market rates is a reminder of why the opportunity for would-be home
buyers might be fleeting. Right now, conditions for buyers are
exceptionally good, because current mortgage rates are at record
low levels, and housing prices are still well off their peaks.
Already though, recent numbers indicate that housing prices are
starting to move. If this continues,
mortgage rates might follow
. In particular, if lower-end housing prices are now making the
strongest gains, people looking to enter the housing market for the
first time should prepare to act.
Again, the housing market may be better off than people know. As
many found out during the housing boom, waiting until everyone
knows the market is healthy before you buy can be an expensive