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Prices in February had their best rise in over six years up eight point 1% over a year ago Case Shiller Index -- And new home sales up this morning that they were better than expected but how long can the good news last.
The last hour markets now Robert Schiller had this to -- today get.
And I think that home prices might be lower than there are now in the few years not that's not a forecast it's -- worry.
He's always worried -- back what he's been through Kevin Finkel resource real estate executive vice president says buying a home.
Is a bad investment he joins me now.
Kevin thanks for the buzz kill coming home prices went up 8% in February and I think it was Phoenix up 23% over a year ago.
Why are homes a bad investment right now.
Yeah well you know I think professor Shiller was a great intro if you look at his data back got to 189.
And look for a hundred years of home prices home prices remain flat for a hundred years at 0%.
Increased every year when you take out the effects of inflation.
That you look at the type -- between 1997.
It was a real aberration from the norm it was a fad if you will I think got professor -- even call that that.
And if you look at where we are now on on this very long time frame you can see that home prices have now returned back to about -- Historic norm when you look at case Shiller and we look jacked up price to income bubbles and in so things look pretty normalize right now.
So one would believe that if things of -- from housing prices are gonna revert back to their mean.
And they're mean is about 0%.
Increase -- for inflation.
Every year if you look at -- home as an investment 0%.
Every year is not a great return when you can invest in other places like the S&P 500 can get over 5% on based.
Side I think that in 2000 and then in 2009.
But that Dallas down at 6800 you might have been really happy.
Back in 062 to be invested.
In a home now.
What a great idea I mean if I managed to go 0% and I -- my -- against inflation.
That's actually not so bad is it given the fears of rampant inflation it could break out.
Well you know listen if there's rampant inflation.
It is going to be affecting interest rates and so right now one of the great things has happened is single family -- -- Is that about purchasers have access to incredibly low mortgage rates.
And if we ever get into a period where we have inflation in the in the market place.
You were very likely gonna see interest rates move up and if interest rates move up it's -- potentially really chill home price is -- -- actually.
For people that have -- -- investment and I think more concerning and that is that the -- -- the US government ever -- -- pulls back on its subsidies through Fannie and Freddie.
You could really see an effect on -- -- -- single family housing market -- course Tuesday mortgage interest deduction that's out there that's right constantly talked about being employed.
-- of any of those government supports go away for housing.
It could really -- the prices and if you own a home with 80% leverage on it and prices move even a little bit your -- is going to be significantly impacted.
-- but then the prices would fall in a new wave of buyers who now rent like me.
Might come in and see those prices is more attracted to go ahead and buy.
You cited other thing that what worries me an actual little glut in a lot of pro how the guys that have been saying finally the over supply of unsold homes is off the market but you see a possible new glut coming explain.
So if you look right now in the winter we haven't seen a lot of homes coming on the market and so there definitely is a huge supply on the market.
However if we look at them out of homes that are either been foreclosed on are in foreclosure or are delinquent on payment you -- over two and a half million homes that are sitting on the sidelines.
And you better believe it this market it strengthens a little bit.
I would just seems to be doing right now you're gonna start to see and a bill ability of those people to -- back onto the market.
I should also say that 27%.
Of mortgages are still under water in those -- -- stuck in their homes.
So is that pricing starts to go what you're gonna see more supply coming into the marketplace and -- on the supply side.
Of course you gotta worry about the -- -- -- until you know we still have an unemployment rate at seven point 7%.
That's very high if people can't get jobs if they don't have -- -- it's gonna be very hard open and go get a mortgage a buy a home.
Still come up Phoenix the prices up 23% in -- maybe I'll take it.
Thanks for being whether yeah Kevin -- nice job thank you so much.
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