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Department of Cognitive Dissonance: Housing Edition

Real housing prices fell by 0.8% in the past year…

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Ben Walsh: This is what a housing rebound looks like:

The Case-Schiller home price index was released this morning and the data through June:

showed that all three headline composites ended the second quarter of 2012 with positive annual growth rates for the first time since the summer of 2010. The national composite was up 1.2% in the second quarter of 2012 versus the second quarter of 2011, and was up 6.9% versus the first quarter of 2012.

In short: everything is moving in the right direction.

The index has still quite far from the 2010 post-crisis peak, but its year-over-year rise rise comes amid other recent signs that the housing market is recovering (except in Connecticut). Supply has been shrinking and there are real reasons to think that the specter of distressed properties depressing prices won’t materialize. 

The housing market is still restrained by problems like tight lending, a dearth of first time buyers due to the overhang of student debt, and a lack of strong economic growth. In 20 major cities, prices are still well off their peaks, as this  great graph  from Bill McBride at Calculated Risk shows. As depressing as those drops look, it’s not reasonable to expect a return to 2005/2006 prices, particularly in areas like Las Vegas, Phoenix and Miami where speculation was intense. 

A return to even mid-2003 prices won’t fuel another boom, but that’s probably a good thing. And as Nick Timraos notes, rising home prices, however modest, “will help shrink the glut of underwater borrowers and could help buoy consumer confidence”.

No, this is not what a "housing rebound" looks like.