Seeds of Housing-Market Recovery Have Been Planted, Case Says: Tom Keene

By Austen Sherman and Tom Keene – Jan 31, 2012 

Jan. 31 (Bloomberg) — Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller home-price index, talks about the U.S. housing market. He speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

The housing market may be poised to begin its turnaround in the months to come, according to S&P/Case-Shiller’s Karl Case.

“If you look at the fundamentals, such as number of existing sales and number of new sales, and look if they are going in the right direction, they are,” Case, co-creator of the S&P/Case-Shiller index of property values, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.

The index, which measures residential real-estate values in 20 cities, declined 3.7 percent from November 2010 after decreasing 3.4 percent in the year ended in October. Economists projected a 3.3 percent drop, according to the median estimate in a Bloomberg News survey.

Case said the information provided in the index, a three- month moving average of September, October and November, lags behind the real economy and he said he is more optimistic about the recovery than in past months based on leading data.

“I do believe the seeds of the recovery are being planted,” he said.

According to Case, even with the decline in prices since the housing bubble burst, many homeowners who bought in the early 2000s are “still way ahead” in their investment, he said.

“You have people way on top with a high willingness to pay who are transacting,” Case said. “Everyone else is holding out waiting for prices to go back and no one knows how long it will take for that to clear up.”

‘Shadow’ Inventory

This leads to “shadow” inventory, he said. There are many people postponing the sale of their homes until prices stabilize. As the market picks up a “seemingly infinite supply” will become available, he said.

Case said another positive sign is the trend in household formations, in which the “massive movement” of young people who moved in with their parents during the housing crises are venturing out again.

From Sept. 2010 to July 2011 the market lost 750,000 households, according to Case. During August and September, of last year the market added 518,000 households, he said.

“We are getting at the business of tearing down some of the old and cleaning up the mess,” Case said. “It’s a complicated picture, but everything seems to be moving in the right direction.”

To contact the reporters on this story: Austen Sherman in New York atasherman18@bloomberg.netTom Keene in New York at


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