In November, the S&P/Case-Shiller U.S. National Home Price Index officially passed the high set in July of 2006, mere months before the collapse of the US housing market. Unfortunately, however, this index does not take into account inflation which still puts housing prices 16 percent below the 2006 peak. It is still a noteworthy cause for mini-celebration, but what does the national resurgence of home prices mean exactly for the US economy and the financial sector?
Well it is hard to discern at this point but it is decidedly a turning point for the US housing market. The much anticipated moment from recovery to advancement is perhaps dawning at this very moment.
Take Denver for instance, the epitome of a booming housing market. The cost of housing here in Denver is more than 180 percent above the national average (depending on how the study is conducted it may be higher) and it seems every day more and more construction cranes go up. However speculative the market may be here, it pales in comparison to the pre-crisis days of rampant gambling with bank money.
The housing market today is much more secure than it was before the ’08-’09 fiasco thanks to the financial reforms implemented in response to the global housing meltdown. The mortgage-backed securities today are not upheld by the shoddy “Ninja” (No income, no job, accepted) standards that were heavily prevalent during the boom times, ensuring a safer housing sector and financial system at large.
The big push behind the resurgence of the US housing market can trace its roots to the oft regaled pendulum of crisis and boom times. The housing market essentially shut down during the panic that gripped the world in 2008, this in turn led to a drastic underdevelopment in some key metropolitan areas around the US. Now that the US economy has returned to growth and prosperity homebuyers are finding themselves in a unique predicament of having limited options at best. Apartments and homes are scarce, forcing would be renters and homebuyers to deal with unsustainably high prices. Hopefully in the coming years homebuilding will catch up with demand and not overshoot its mark in drastic fashion like in years past.