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Housing price bottom still holding

The Case Shiller home price index in November rose for the sixth month in a row. Even after adjusting for inflation, home prices are up. And given the nature of the index, which operates with a significant lag, the message here is that home prices in 20 major markets hit bottom sometime around last March or April, after declining 36% in real terms from the high of early 2006. The housing price bubble popped, but it is no longer deflating. Prices have come back into line with incomes (actually, housing affordability is near an all-time recorded high, according to the National Association of Realtors) and interest rates have fallen to historically low levels. This is how markets adjust to changing circumstances. The $500,000 home that turned into a deadweight albatross for the guy who bought it in 2006 is now a $320,000 dream house for the guy who buys it today.

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