Friday, February 26, 2010

Just What Do They Mean By Recovery?

I've never quite understood what people have meant by a housing recovery.

The recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago and comes at a time when the Federal Reserve is nearing the end of a critical, year-long program to support the mortgage market.

"Housing is at a pivotal, ambiguous point," says Ted Gayer, co-director of Economic Studies at the Brookings Institution.

A spate of recent reports from home sales to mortgage activity has been starkly negative. And, even if some of it can be written off to seasonal patterns, namely weather, the weakness is not what what people expected with the extension and expansion of the government's homebuyer tax credit that jacked sales for several months last summer and fall.

Is it the end of falling prices? A sudden return to bubble-era home price inflation? Something arbitrary inbetween?

Home prices were too high, and home price increases were obviously unsustainable. They're not going to magically shoot up again, and we should hope that the bubble doesn't return.