Wall Street Journal Declares End To Housing Bust

If you woke up this morning feeling slightly more invigorated… or maybe your coffee tasted just a bit better… maybe you found a $5 bill in your coat pocket on your way to work. It’s no coincidence: The Wall Street Journal has declared an end to the nation’s extended housing bust.

To bolster its claim, the Journal looks at four factors it says show sustained improvement in the housing market.

1. Slowly increasing home prices
A look at the Federal Housing Finance Agency and Case-Schiller housing price indices are beginning to trend toward positive growth.

2. Increase of existing single-family home sales
Though the month-to-month numbers go up and down, we appear to have dug ourselves out of the crater from when home sales hit bottom about two years ago. Some of these homes have been bought by investors who are now renting them out. Regardless, the home vacancy rate is the lowest since 2006.

3. Housing starts are improving
This is the indicator that needs the most spin, as housing starts are still 60% below where they were 10 years ago. But the fact that we’ve seen some uptick and relatively steady growth since early 2011, gives some credence to the notion that the housing market has begun to move out of the trough.

4. Home building is finally contributing to the GDP
Between 2006 and 2011, home building was on the negative side in terms of contribution to the GDP. For the last year, that trend has flipped, with home building actually contributing positively to the GDP at levels similar to pre-bubble years.

“From here on, housing is unlikely to drag the U.S. economy down further,” writes the Journal. “It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses.”

However, the Journal admits that if the inventory of homes that are currently underwater or facing foreclosure were to flood the market, it “could reverse the recent rise in prices.”

The U.S. Housing Bust Is Over

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  1. Coffee says:

    MISSION ACCOMPLISHED!

  2. GuJiaXian says:

    I’ll celebrate when the appraised value of the house I bought (on good credit, with a mortgage I can afford) in 2008 actually comes within $50,000 of the mortgage I still owe. Shame on me for buying within my means and then, just a few months later, having the housing market crash. (Then I lost my job and was forced to move to another state, so I can’t even live in the house, but that’s another issue.)

    I know the neighborhood my house is in is still severely affected by the housing crash. How can anyone think that things are fine and dandy now?

    • Jevia says:

      Agreed/in the same boat (although I still live in my house). Two houses on my street have been up for sale for 8 months. The house behind mine was taken off the market, hasn’t yet gone back on.

      • GuJiaXian says:

        I’m lucky to have a renter, but the rent is less than my mortgage (not to mention insurance), so I’m still losing money on the place. Plus, I have to pay for housing in my new location. Don’t get me wrong: I’m glad to have found a new job and to have a renter, but the “housing bust” is NOT over.

        • frank64 says:

          I think if you look at prices based on things like affordability, percentage of income, and inflation you will find that homes may be fairly prices now. This would make the bust over. You just bought when they were overpriced and got stuck.

          • Phildogger says:

            This. Frank 64 is correct. It’s amazing how people don’t think it is over because they are not back to the purchase price they paid. News Flash – You overpaid due to an inflated market. Things have a way of righting themselves, and houses are doing so now.

          • purepoppeople says:

            But I don’t think this is true for middle class people in many metro areas considering compensation is at such low levels. Unfortunately, I live in the Northeast and when I look at what people in their 20s are getting paid vs. the cost of a decent family home, the “affordability” just isn’t there. In many cases, what’s on the market is still inflated compared to the quality of the property, especially considering that many homeowners have put off putting any work into their home for the last five years so you’re seeing a lot of properties in desperate need of repair/update.

            • Cor Aquilonis says:

              I make a solid wage and live an a relatively inexpensive metro, and the homes where I live are are either ridiculously expensive and nice, decent but still overpriced, or dilapidated and affordable. Once you add in the cost of bringing a dilapidated house up to liveable, it becomes overpriced.

              Just planning to rent until my income catches up or housing drops lower (doubtful.)

          • stellapurdy says:

            Yes, but weren’t they all overpriced because the banks effed everyone by giving loans to every Tom, Dick and Harry driving up the price? I bought my house on good credit with a substantial down payment thinking that I had a stable investment. Now I’m stuck as if I sell I have to list it for $20,000 less than I got into it, not including improvements. And I’m one of the lucky ones. The problem isn’t over, except for maybe the banks that made their money and are high tailing it down the highway.

        • peznin says:

          I was in that same exact boat. Well, except that my house was worth 150k less than what was owed. We bought in 2005, within our means. Then the market REALLY tanked. After much frustration with Bank of America, we finally short sold the house last year.

      • cactus jack says:

        I’m in the same boat. Now if only things would get even better so my house value wouldn’t be $30K less than my mortgage so I can sell the bastard and move on. Purchased right before the bubble burst. Dislike my neighbors, not too into my house anymore, and just want to leave. On the plus side, interest dropped to 2% and we are paying as much as we can at this rate to get this bugger done.

    • MonkeyMonk says:

      It’s not fine and dandy so much as it’s no longer plummeting. The bounce back looks to be steady but very slow so you’re still pretty much screwed.

      The good news is that as more and more people flock to rentals you should be able to raise your rent annually and close the gap with your expenses.

    • eccsame says:

      I hear you. The place I rent is going through a foreclosure and its totally messed up. I mean, in a few months I’m going to have to find another place to rent!

    • neilb says:

      Silly you. Our investment systems have changed housing into a high-risk financial instrument. If you wanted to do something reasonably sane with your money, you would have invested in a no-interest bank account!
      Prices in our city have inflated about 20% this year because many surrounding communities have failing schools and our school district is the refuge. Unfortunately, we are renting–waiting for this fabled “housing bust” to happen where we are living.

    • dangermike says:

      Not to be a negative nelly or anything, but you’ll be waiting quite a while. If the going prices have fallen 50% from 2008 and we expect prices to correlate to wage increases, and figure on 3.0%/year on those, it could easily be 20-25 years to reach the peak again. Factors from unemployment to student debt to baby boomer retirement rates, rising taxes, wage stagnation, etc. to less commonly discussed things like the upward pricing perutbation from governmental influence suppressing mortgage rates are all acting in coordination to make the future outlook bleak, regardless of what the Journal is claiming. (and unlike the frequent claim of so many politicians, what we need isn’t a return to and stabilization of prices from the peak, but rather a reasonable and sustained drop in pricing so that people with the means to purchase in this bleak economy might actually find the opportunity to do so)

  3. Invader Zim says:

    Well since they are the ultimate authority it must be right.

  4. The Colonel says:

    I blame the OP for not renting.

  5. nauip says:

    Good! They can start building more houses!

  6. Cranky Owl says:

    Meh. I had my condo appraised recently for a refi, and it’s now worth $55,000 less than what I paid for it. The temptation to just walk away & mail the keys back to the bank is strong.

    • GuJiaXian says:

      I hear you. My wife and I have excellent credit scores, and we investigated doing a short sale of our home. However, we just couldn’t stomach what it would do to our hard-earned credit.

      • chefboyardee says:

        My wife had an excellent credit score, mine was so-so. We bought a townhouse in 2007 for $165k, both lost our jobs in 2009, found new jobs in a different state, appraised at $120k, did a short sale for $80k to a company that rebuilds and flips houses…and less than 3 years later, our credit scores are already better than they were before the short sale.

        Granted, we’ve bunkered down, lived frugally, paid off all our credit card debt, all my student loans, paid off our pre-owned cars, and only have one credit card that we pay off every month. But, a short sale doesn’t necessarily mean credit death.

  7. Sorta Kinda Lucky Soul says:

    I don’t know how they can make this generalized statement when, in many areas including where I live, house values are still falling. Mission Accomplished indeed!

    • AtlantaCPA says:

      The Wall St Journal executives’ homes have started going up in value again so that’s good enough for them.

    • alexwade says:

      We were also told the recession is over. Just because the US is no longer in a recession by the book’s definition doesn’t mean the economy is improving. (And I don’t want to get into the politics of why the economy isn’t improving. Let us leave that hornets nest alone.)

  8. humphrmi says:

    I have about the opposite situation as most commenters here. I bought pre-bubble, made payments that actually reduced my mortgage balance, refi’d three times and always put more money in and reduced my mortgage term and rate. Then last year after some unemployment drained my savings and my house needed some repairs, I took a cash out refi. Reduced my mortgage term again, and lowered my rate & payment. At the time, my house appraised for what I paid for it ten years prior, although even with the cash out my new mortgage was way below the appraised value.

    Now, in the last year, my home has lost ~20K value, yet I’m still above water and still can afford my payments.

    Since we plan to live in this house until we retire, I don’t really give a rats ass how low its value goes, at least in the short to mid term.

    • GuJiaXian says:

      I think that’s a good point about home values: If you plan on living in the house for many years, who cares what it’s “worth” on paper (other than for taxes, etc.)? My problem is that my wife and I bought a home, planning to live there for a long time. However, a period of unemployment and then a new job in another state required us to move. Now we can’t sell the house without taking a huge hit.

      • Jevia says:

        When we bought, it was with the expectation that in a few years, we’d refi or take out a construction loan to redo the kitchen, bathrooms and expand the master bedroom/add walk-in closet and build another bedroom. Now those plans are bunk unless we want to finance the whole thing on credit cards (NOOOOOOO!!). I’m more than willing to remain in the house, but after 5 years, the small kitchen and bathrooms are beginning to really annoy me.

        I am hopeful that if the signs are pointing to improvement, maybe our plans will come to fruition in another couple years.

      • crispyduck13 says:

        I care what it’s worth only because if I want a HELOC or a refi doesn’t an appraisal come into the process? I bought on New Year’s Eve 2010, and have seen the Zillow value drop steadily since. I plan to be here at least 10 years and make improvements, so this roller coaster doesn’t freak me out quite as much as someone who needs to sell next month. However, I worry a lot about the amount of money I spend fixing up the place. I don’t want it to be money thrown away when I find out in 10 years the value has scraped back up to just what I paid for it.

  9. AtlantaCPA says:

    “However, the Journal admits that if the inventory of homes that are currently underwater or facing foreclosure were to flood the market, it “could reverse the recent rise in prices.”

    This is like saying the boat that sprung a leak and was sinking is now patched with paper mache’ and therefore “all fixed!”

  10. StatusfriedCrustomer says:

    The description “Bust is over” is misleading, since the WSJ’s own data indicate that the housing situation is at its worst point right now. Think of a sine wave, and what it means for the trend to be reversing from “going down” to “going up”. When does this happen? Why, exactly at the lowest point. Not at the midpoint like the headline seems to suggest.

    //housing price indices are beginning to trend toward positive growth//

    //From here on, housing is unlikely to drag the U.S. economy down further//

    I.e. we are right now at the worst housing situation. Things will now “start to” get better. That doesn’t mean they *will* be better until several years from now. The headline should have read: The housing bust WILL BE OVER (x) years from now.

    • DaveInBillsburg says:

      Unless you interpret “bust” meaning the market will keep going down. In that case it is correct. The categories they used are all indicators of the housing market going bust. These would be similar indicators I would look for in the housing market to determine whether to invest or not. If housing starts were falling and the supply of single family houses were expanding, those would be indicators the housing market it falling.

      It won’t be true for every area of the country, but as a whole the housing market in the US is improving. Not sure you can call it a bust if things are improving.

      Of course this is similar to someone that has a job saying the economy is fine since they are working, but to somone that doesn’t the economy is in a shambles.

    • The Colonel says:

      Actually, it’s more like “recession is over.” That just means the trend downward is over. People tend to think it means “economy is okay now.” Not necessarily the case.

  11. ronbo97 says:

    Yes, we’re no longer on the sixth level of the sub-basement. We’re now on the fifth level.

    Gotta love Rupert Murdoch. Next week: Elvis is still alive !

  12. aleck says:

    I am surprised they did not wait until Romney is elected and declare the a week later as his first accomplishment.

  13. ChuckECheese says:

    David Lereah, is that you?

  14. Quake 'n' Shake says:

    It’s no different than when a recession “ends.” Things are no longer getting worse. That doesn’t mean thing are where they were before the bottom dropped out however.

  15. DFManno says:

    It’s News Corp. They lie.

  16. Rick Sphinx says:

    Mortgage Burning has always been the tradition. I’m going to have a Mortgage/Appraisal Equalization party, when my home is worth what I owe. Then I will be free to either dump it, or stay. With that said, I just found out my home went up an entire $1800, not much, but it’s better then nothing, or going lower. Hope the worst is over, but only time will tell.

  17. OMG_BECKY says:

    Whatever happened to the old rule, “All real estate is local”? To say the bust is over is a sweeping generalization.

  18. bben says:

    The WSJ doesn’t live in the same world as the middle class.

  19. do-it-myself says:

    Haha, they haven’t fooled ME! What a way to trick people into buying a new home. Just use statistical measures that are unrelated to each other.

    At the same time I do believe that the cheap housing prices HAVE increased sales.

  20. Cicadymn says:

    Just in time for the election season too!

    How about that!

    • Cor Aquilonis says:

      WSJ has been pretty notoriously conservative. Why would they make good news for the Obama administration?

  21. 180CS says:

    It’s the WSJ….now a product of News Corp. If they told me the sky was blue on a hot summer day I’d have to check myself before accepting it as fact.