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Karl Case: American Dream of Home Ownership ‘is Just Gone’

Thursday, 26 Apr 2012 01:43 PM

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The housing market is bumping along the bottom and due to improve but the American Dream of home ownership as most know it is “just gone” and becoming a thing of the past, says Karl Case, co-founder of the S&P/Case-Shiller Home Price Index.

"We're bouncing along a rocky bottom," Case tells Yahoo's The Daily Ticker.

The S&P/Case-Shiller Index covers home prices in 20 major U.S. cities. February home prices fell 0.8 percent compared to January levels and home prices are down 3.5 percent from February 2011.

Editor's Note: Obama’s Economic ‘Fix’ is In . . .

Home prices are currently at 10-year lows, while the 30-year fixed mortgage rates are hovering under four percent, yet more Americans are renting their homes these days thanks to tight credit and general economic insecurity.

"The owner occupancy rate is very, very low," Case says. "We've added seven million households in the last seven years and six million of those are rentals," Case says, adding that the "American dream is just gone."

The index's other co-founder, Yale economist Robert Shiller, agrees that housing may take years — even lifetimes — to recover.

A sluggish labor market, high gas prices and a weak confidence in the economy in general will keep prices low.

"I worry that we might not see a really major turnaround in our lifetimes," Shiller says, according to Reuters.

Foreclosures, meanwhile, continue to pose a problem in the majority of U.S. housing markets, according to ReatlyTrac, a real estate research firm.

In the first quarter of 2012, 54 percent of U.S. metros reported quarterly increases in foreclosure activity.

First-quarter foreclosure activity increased from the previous quarter in 26 out of the nation’s 50 largest metro areas, led by Pittsburgh (up 49 percent), Indianapolis (up 37 percent), Philadelphia (up 30 percent), New York (up 24 percent), Raleigh, N.C. (up 23 percent), and Virginia Beach, Va. (up 22 percent), RealtyTrac says in a note.

Portland, Oregon, Las Vegas, Providence, R.I., Salt Lake City, Boston, and San Jose, Calif. saw decreases.

“First-quarter metro foreclosure trends were a mixed bag,” Brandon Moore, chief executive officer of RealtyTrac, says in the statement.

“While the majority of metro areas continued to show foreclosure activity down from a year ago, more than half reported increasing foreclosure activity from the previous quarter — an early sign that long-dormant foreclosures are coming out of hibernation in many local markets.”

The Federal Reserve has pointed out that housing continues to weigh down on the economy.

"Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance," the Fed says in its April monetary policy statement, where it left interest rates unchanged at near zero percent.

"Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable."

Editor's Note: Obama’s Economic ‘Fix’ is In . . .

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