The widely followed index runs more than a month behind Dataquick and other housing researchers, but it's finally showing what many of us have seen: A substantial increase in housing prices, fueled by limited inventory, a drop in foreclosures, and lots of all-cash deals. December prices climbed 10.2 percent compared with a year earlier, according to Case-Shiller. SF was up 14.4 percent and Phoenix was up 23 percent. Happy days, right? Not necessarily, says economist Robert Shiller who created the index. From the WSJ:
Robert Shiller: I'm more worried than most people that it could be a short-lived turnaround. It could be like the 2009-10 upturn where we saw home prices rising right after President Obama took office and right after the home-buyer tax credit was instituted. In that upturn there were some cities that did quite spectacularly. And then that fizzled. I'm not too sure that this one will extrapolate either.
WSJ: Why are you more worried than most people?
Mr. Shiller: Part of the reason the indexes have gone up is because the foreclosure boom has receded. Foreclosed homes sell at a lower price, and the share of those sales has been falling. People might be deceived by this by looking at the indexes. The question is whether the gains will be sustained. There isn't any sign of the real enthusiasm we saw during the last bubble. The question is whether this could be the very vague beginning of a new boom? I guess it could. I just don't know.
Shiller's concerns notwithstanding, there was another bit of good news this morning: Consumer confidence rebounded in February after three straight months of declines. From Bloomberg:
The gain in sentiment from the lowest level in more than a year signals Americans are beginning to cope with the a two percentage-point increase in the payroll tax used to fund Social Security and higher gasoline prices that are curbing disposable income. Rising home values and gains in employment may be brightening attitudes, helping to underpin spending. "The job market is healing, we're creating enough jobs to at least keep the unemployment rate stable," Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania, said before the report.
Meanwhile, we should keep watch on Congressional testimony this morning from Fed Chairman Ben Bernanke. Dow is up about 70 points.