Green shoots of recovery are pushing up in housing-sector figures but experts warn many potholes still remain and prices could still drop.
Home prices in major U.S. cities rose in May for the second straight month, propped up by a flurry of spring buyers. But after adjusting for such seasonal factors, prices fell in a majority of markets.
The Standard & Poor's/Case-Shiller home-price index released Tuesday showed that prices rose in 16 of the 20 cities tracked.
That doesn't mean the sector is zooming ahead in the fast lane to recovery, says Robert Shiller, a Yale economist and index architect.
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"The outlook for housing depends on many factors, including political factors," Shiller tells CNBC.
"We've seen home prices fall now for more than five years, and I'm not sure that trend is over."
Karl Case, also an index architect, says he sees clouds on the horizon as well.
"I'm pretty pessimistic about a few things. If you count households, the number of households is declining. That's a decline in the market on the demand side. We're not producing anything," Case said on CNBC, appearing alongside Shiller.
Construction is weak and people are no longer viewing home-ownership as a low-risk investment.
But there is a silver lining.
"Having said that, housing is really affordable now relative to where it was in the last five years."
David Blitzer, Chairman of the S&P 500 Index Committee, agrees that the country is still a ways off from seeing larger-scale home purchases.
"I think we are getting to be something of a rental society. Home ownership is down, which means people are homeless or they are renting," Blitzer tells CNBC.
"But what I think we forget in looking forward is how incredibly high everything got in the middle part of the decade. Home prices went up double or almost triple in a number of cities in six or seven years. Housing starts had hit levels that have not been probably since the Korean War."
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Others agree that prices haven't bottomed out.
"Home prices have yet to find a bottom," says John Herrmann, senior fixed-income strategist at State Street Global Markets in Boston, according to Bloomberg.
"Buyers are incredibly cautious. They are concerned about the unemployment rate. There is uncertainty about the economic outlook."
Turning to the economy and fears that Congress will not lift the government's $14.3 trillion debt ceiling and throw the country into default, Blitzer says homebuyers shouldn't be too alarmed.
Credit ratings agencies may yank the country's AAA rating, which could send borrowing costs rising across the board in the overall economy.
"I'm still confident Congress will find a way to raise the debt ceiling but if they don't I think the credit of the average American homebuyer, unlike the credit of U.S. government in a national default, would not suffer that much and we would recover from it slowly but surely," Blitzer says
Shiller says the impasse is inflicting more damage to the nation's confidence more than to interest rates.
"A downgrade of U.S. government debt would plausibly raise interest rates and that would communicate to mortgage rates but I think more importantly would be the effect on confidence and our national spirit, which is so conflicted right now, and it's harming our sense of confidence," Shiller says.
"That matters more than direct effect of interest rates."
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