2012 – The Year The Housing Crisis Ended

Experts find the silver lining in the market cloud

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Good news/bad news

Last week’s Case-Shiller index seemed to be a case of “good news/bad news,” according to economic experts.

Although the index showed housing prices at their lowest level since 2003, many economists feel that in combination with the increase in home sales velocity and an encouraging labor outlook, the falling prices are more a reflection of market clearing out the distressed properties at attractive prices for cash buyers.

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Home prices are on the mend

In an article in the LA Times, an economist from Capital Economics was quoted as saying that “home prices were ‘on the mend,’” and that they see home prices stabilizing, the first step in recovery.

 2012 will go down in history as the year that the most severe house price crash on record ended… The improvement in general price trends is being driven by the 13% rise in home sales since last July. In turn, this reflects the strengthening in the economy and signs that banks have become a bit more willing to lend.

Expert opinions see this year as the bottom

Marketbeat, a blog from The Wall Street Journal, gathered a few more opinions from “economists and market observers,” agreeing that the index drop is not a red alert on the crisis and recovery timeline. An economist from MFR points out that in the six years leading up to the market’s peak in 2006, the price index rose by 155% — in the six years since, the index has dropped only 34%. Other economists point to a six-year cycle, in which housing bubbles tend to bottom out six years after peaking.

On the whole, if 2012 sees home sales continue to rise, the distressed property inventory continue to shrink and the job market continue to improve — it could well be the low point on the housing market graph.

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