Karl Case: Housing Hit Bottom

" S&P Case Shiller numbers this morning showing four straight months of improving home prices. And occasion Case Shiller says it's more than just what they call on the markets with dead cat bounce Karl Case joining me now from Massachusetts welcome professor well. More than a dead cat bounce argue really believing that this is the bottom can we definitively call it right here right down on Fox Business."

" But I think it's a -- and whether it's the bottom depends on whether we get double dip recession. But it certainly if it looks like conduct an -- actually conducted probably is. And you've got you've got a lot of numbers now over the last four months. Pending home sales existing home sales. We sold six million unit was selling it to six million dollar six million unit pace per year that's takes us back more than two years. It's -- how awful lot of good numbers we have. Almost all of our city's been up now for four straight months and I've been cautious. And little less cautious. And now I I really do think it's a bottom despite the fact they're many forecasters are saying prices are gonna decline clear that 2010."

" And I now have -- it's it's hard to turn this around especially considering the during the bubble professor. We sought inflated numbers by 80% to now what we pulled back about thirty to forty wouldn't that indicate that we still have more ago."

" Well 30% down nationally is a huge number know one another and it went right mind would have predicted that ten years ago. 30% decline in some places fifty and some places 54% since -- So it's -- it's a -- dramatic ride eventually. With prices coming down as sharply as they've come down and with four point 2%. Interest rates. On a thirty year fixed mortgage and the government thrown for 8000 dollars apiece in tax credit it be amazing if demand was starting to show up. In the market."

" What we just heard of course the top Democrats in the Senate have reached an agreement to extend that soon to expire 8000 dollar tax credit for the first time homebuyers that's what Chris Dodd as saying. What would that do just that extend things does it sort of mask. How the real number should look right now what do you make up an extension of that does go through."

" While most of the writing indicates that although two of two million or so households will use the credit. Only an additional sales additional sales about 350000. Will be the result of the credit. So it's pretty expensive per unit for the benefit of those -- fifty. Thousand houses it's gonna cost about forty or 50000 dollars per unit to get a sale. So. I think it's it's certainly 353000. Units. It is of substantial piece of six million but it's not decisive. And I think that I think that credit is desirable from the standpoint of keeping the housing market going. But if it seems to me that at some point you have to draw a line and we've got tremendous tax at least through the income tax to homeownership. We've got we've got a ton of stuff going on his trip -- the the Fed's going to -- one point 25 trillion dollars worth of mortgage backed securities to keep the mortgage rate down. Of their bank 200000000200. Billion dollars worth of debt obligations from Fannie and Freddie. So at some point you've got to say -- We like homeownership but it's not the only thing."

" I completely agree with you and I think at some -- we have to say let the market stamp on its own two feet. And let homebuyers to handle their own two feet didn't we get professor into this kind of troubled by making it too easy for people to buy homes homeownership. It's not right it's a privilege is that not."

" I think I agree with you and it's certainly not the it's nothing the most important public policy objective ever. It's important people people. Like homeownership for a variety of reasons and it's -- worthy of some substance subsidy but I think we've drawn. Which is just really focused on an awful lot will be to see a huge drop off if we do pull this out we do not extend the umpire -- that. That's the fear I think the market is that there's plus booklet for the crew of six million sales we're gone at a rate of six million -- Those are not all tax credit buyers. So I think this market's got a little inertia. It's been going for four months if you look at the idea that they gain over that period of time it's 5%. Can have the most important thing to me is that California. Which is a quarter of the value in the country is doing very well and prices up and San Francisco. Over the over the five months -- over 10%. I'm San Francisco's real important because it's as I said -- the value of the country and it's been so expensive. That it's it's the declines have been huge and to get it straightened out I think it looks it's looking like the first out of the box. Would mean a lot to the mortgage market -- in a lot to to to the economy."

" Professor great to talk to you you're always welcome on the program thank you for coming on. Karl Case is talking Wellesley economics professor and co-founder of the S&P Case Shiller and."