Further support that now is a great time to buy a home . . .
In a December 30, 2011 New York Times article, Karl Case, the co-founder of the prestigious Case-Shiller Index, presents his perspective. The following is an excerpt from the Times article and is reprinted in its entirety.
Karl Case:
‘It’s unbelievable’
A professor emeritus of economics at Wellesley College, Mr. Case’s name
is practically synonymous with real estate values, because he helped
create the Standard & Poor’s/Case-Shiller home price index
(along with the Yale professor Robert Shiller), which is pretty much
the Dow Jones industrial average of real estate. Thanks to the
Case-Shiller index’s relentless decline since the financial crisis, many
are predicting that residential real estate will drop even further in
2012. In a radical reversal of the conventional wisdom, home ownership
has gone from an unquestioned virtue to something to be wary of.
“People are discouraged and fearful,” Mr. Case said. “They’re moving in
with their parents. People thought home prices would never go down. We
now know that they do go down, and you got hammered if you were
overleveraged. Now people think they’ll never go up. The fear is there
won’t be any capital gain.”
This week S.& P. reported that the Case-Shiller index recorded yet another drop in home prices through the end of October, with 19 of 20 metropolitan areas (including New York City) showing declines
from the previous month and year. United States housing prices on
average are now where they were in 2003. But Mr. Case points out that
the data masks some signs of eventual recovery.
The 20-city composite index of home prices hit bottom in March 2011 and
has improved modestly since. “Household formation is increasing and the
vacancy rate is dropping,” he said. “Housing starts are at a 60-year
low, and they’ve been there for three years. That’s unheard-of. We’re
starting to see some signs of an increase in value.”
But looking at a home like a stock or bond is probably the wrong
approach. “If you think of a house as a consumer durable and you qualify
for credit, it’s unbelievable how cheap housing is relative to previous
years,” Mr. Case said. “Mortgages are cheap. If you’re buying a house
or apartment to live in and pay for over time, and can afford the
payments, then it’s a terrific time to buy.”