Ten lessons to learn about the housing market


Earlier this summer, David Wessel, the economic editor of the Wall Street Journal, declared the housing bust is over in the United States. As we all know, real estate is local, but there are indices and statistics that economists follow to give them a broader picture of the national market despite how uneven regional markets might be across the country. The most widely-known housing price index in the United States is the S&P/Case Shille, which is showing a bottoming out of the real estate market.
“Nearly 10 per cent more existing homes were sold in May than in the same month a year earlier,” according to  S&P/Case Shille, “many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months’ worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.”
Mark Fleming, the chief economist from CoreLogic, a major housing data-analysis company, also sees the reduced inventory of unsold homes as the key indicator that the market is beginning to recover. Even new home builders are seeing notable increases in starts compared to the same period last year. 
In a survey carried out by the Wall Street Journal in July, which targets housing forecasters, 44 per cent said they believed the housing market has reached bottom. Only three per cent felt it had not. 
After a precipitous seven-year plunge into the abyss, there is light at the end of the tunnel. 
The Wall Street Journal article said housing will not drag the U.S. economy down any longer. A caution remaining is the large shadow inventory of unsold homes. The hurdle buyers face, which can also hurt the recovery, is that the mortgage market, for obvious reasons, has become more regulated and dysfunctional.
It is interesting to note what National Association of REALTORS® past-president, Ron Phipps, said about the nascent turnaround in the U.S. He was quite sanguine and circumspect about it all. While Phipps is relieved, he said the many hoops buyers have to to go through to obtain a mortgage can derail sales.
He does not want to repeat the past. The following are Phipps’ 10 observations/lessons about the housing market and the economy. None of them should be ignored, no matter where they live around the world.
1. The economy cannot recover without housing.
2. Everyone needs shelter, but not everyone needs to own their shelter.
3. High homeownership rates are important, but they must be sustainable.
4. Home prices go up and go down.
5. The process of purchasing /financing a home is more complicated.
6. Sound underwriting of mortgages is critical.
7. Home equity should not be used for ordinary living expenses.
8. Financial reserves for family, companies and countries are necessary.
9. Homeowners confidence in the economy is directly related the value of their own homes.
10. The economy is global.
In general, Americans are still coping with the toll that the housing market collapse has taken on them individually, on the country’s economy and their sense of well-being. 
The bottom line lesson: Live within your current means. The less stress in a person’s life, the more that person can enjoy all aspects of what this life has to offer. 
Life is not worth as much when one constantly wonders how the next monthly bill will be paid.
Life is pretty good when everything one owes can be paid each month — without worry.
While some still talk about a housing bubble in our country, their voices have become more muted of late. Deputy chief economist of CIBC, Benjamin Tal, predicts a soft landing rather than a house bubble.