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Glimmers of Hope for the Housing Market?

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    S&P/Case-Shiller Index co-founder Karl Case on the uncertain outlook for housing.

  • Duration 5:57
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-- much we'll new data on August home prices out this morning showing a slight increase slight is the emphasis here.

Month over month but they are still down three point 8% compared August of 2010.

Co author of the S -- Shiller index report Bob Shiller was on Fox Business earlier today take a listen.

People are not buying houses.

Departments not just because.

It's hard to get credit it's also because they don't feel -- think they might lose their job.

-- with us now is the co hot there Karl Case.

Well He and Bob agree on most things he's a little bit more optimistic about the state.

And the housing market well continue so why is that why are you more optimistic about things are price is finally starting to stayed.

Why.

It's hard to think of me is basically not just you're going to housing for good news that.

We think it's it's not good around all things in comparison but that envoy who -- -- from even depressant in the last fifteen minutes and then trying to get a handle.

We can't talk -- said that unfortunately -- -- We'll -- the end what it what about that chip is there any is very good news because it's as Lori was saying sure you at least sees some up.

Progress in terms of vacancies said -- -- were vacant homes and there were before correct.

Well there's a consistent story being told by the day which is that their flat their lousy.

But -- -- are not going down that way they were going down we had.

They'll sell off if you -- that way over a period of several years where prices fell 33% nationally in an asset we never thought would decline about.

In value and that was preceded by a tremendous boom so the volatility.

At least for the moment is gone that may give us a chance that took cost but it's volatility it's it's it's stood there stability allows it level.

The worst thing is is what's happened to housing starts housing starts was most well behaved economic variable and a and in our key drive it if it goes up to two and a half million every time we have a boom it comes down wanna slow things back down.

200 million -- did -- did -- 255.

Complete cycles.

And didn't do it in 2003 because we got out front with low interest rates but it's been very well behaved that goes from two million -- down to a billion up to two million.

This time went down a 500008.

That's a sixty year low and it's been there for 35 months.

OK so -- at a GDP.

Indeed it dies as we've seen no doubt.

So what are your thoughts on where are we exactly in this cycle for home prices let's just keep it here and which direction will we continue to see improvement even and we had a marginal increase.

As you are kind of teasing out the top at me at least it's something some small -- her positive hope.

Well that the biggest problems are you've got this massive number of underwater people -- and -- who until yesterday couldn't couldn't refinance.

They were prevented from going into market they wanted to clear after it clear -- the junk and their and their balance sheet really and refinance it put -- of these of people by the way you've not missed a payment.

So we're doing that now anyway which is a very good thing.

The real big question though the better question is being debated -- should we should the government be involved in monetary policy to boost the housing market.

We thrown everything in our power.

At the the housing market we've -- have kept interest rates as low as they can possibly go we didn't messed with the term structure of interest rates.

On the government's balance sheet.

We've got Fannie and Freddie -- it -- -- to keep going keep mortgage much money flowing through and we're in the and in the process right now.

Of taking the risk that was going under the government and putting it back on and the -- Doesn't doesn't all of that doesn't all that just prove that more government intervention at this point is not rewarded because it hasn't worked.

Whether it's fiscal intervention in terms of regulations as such or whether it's monetary and intervention from the Fed.

But I think it proves it -- but it certainly sit and certainly makes you wonder if you if you wanna do any more of that to QE stuff.

Because putting putting up liquidity out there is eventually gonna start pushing on inflation buttons and but you know we -- we and asked the economy.

And that the housing market could take another tank if you -- If what if the rates go up 300 basis points which they could if you went to -- risk based pricing.

Which is what they're talking about doing and when Freddie and Fannie and Freddie get you know whatever we're gonna do to them happens.

Hasn't marks not going to be pretty.

And it's very -- you know if you take -- housing starts alone out you lose 4% of GDP.

-- 4% in an environment that -- where the housing market has traditionally pull -- out.

It's a 4% -- So.

And you gotta be careful with housing market it could blow up and that on the downside if it did be -- Yet it's telling shift that we've.

Interest rates as low as they've been for so long we've had QE2 an operation twist they now talk of an additional.

That.

Well.

If you if you look at down the how how have policy -- -- So this is wrong.

I mean there's there's a little bit of hope out there and a little bit of hope is that housing is 30% cheaper was.

Affordability was the big problem before interest rates yours those they are.

If you're you're quality of the people are getting mortgages are clean as a whistle so -- -- are you putting on the books some profitable business and some of the -- -- -- Housing starts are actually -- to 685.

Or 500 dollars 658000.

If it goes through -- if it goes to 700000 by the way I would break out the beer goes to 8000 -- break out the champagne.

-- -- -- We got to leave it at that professor case not -- wonderful to see at that please come back agencies again are right.

I'd love to directives did love with the pessimism guys how how what we're word -- -- -- -- believe they were pray for the opposite banks like I appreciate it thank you.

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