Housing prices took an unprecedented plunge during the recession, with many economists thinking the drop was largely responsible for the depth of the recession. N.C. State University economist Mike Walden explains what’s going on with housing prices lately:
“What I am going to report on here is a measure of housing prices called the K. Schiller Price Index, and what they do is they don’t just look at the prices of housed sold today versus last year; they try to control for the amenities the characteristics of those houses. Particularly, they focus on repeat sales, and what you see if you look at that index is, of course, we had big drops in recent years. For example, in 2009 housing prices were falling in some months at the rate of 20 percent a year.
“Now the good news is that in late 2009, the losses moderated. And so far in 2010 we’ve actually had, to date, a slight uptick to where housing prices during some of those months were rising at the traditional rate of about 4 percent.
“Does that mean we are clear — we are out the woods — in terms of a housing market problem? No, we still have very large inventories of homes for sale — in fact, about double the normal level. And as a result, some economists think that, well, although we have seen some stability and perhaps some slight increases in housing prices we could very well get back into a situation if we don’t get the problem solved of housing prices continuing to drop. But I think what most economists would agree upon is that we are probably past the time where we have those big double-digit drops.”