Karl ‘Chip’ Case is a well-known economist and co-creator of the much-watched S&P/Case-Shiller home price indexes. His experience in the housing market if revered and his advice is rarely held as anything less than the epitome of accuracy. According to an article recently completed by CNN Money, Case claims that the housing market is improving, but that it still has quite a bit of ground to make up from the Great Recession.
The key component to watch, as an indicator on the current and future success of the housing market, is the number of house starts. Housing starts is the measure of new residential home construction projects. Typically, even in the worst of economic conditions, the number of house starts hovers above one million; in thriving economies, this number can reach or even exceed two million. However, in 2009, in the heat of the Great Recession, this figure fell to five hundred thousand and remained there for several months. Since then, the recovery has been a slow one, with the number only climbing its way back over one million in April of 2014.
For Case, this does not scream a permanent and true turn around. The test will be if there is a continued demand that allows the number of housing starts to stay over the threshold of one million. Case hopes that a surge in Millennials entering the housing market over the next few years could help preserve this demand. In addition, he hopes that rich foreign buyers entering the American market in an attempt to secure a safe investment for their wealth may also assist in preserving this reestablishment of a healthy housing start statistic.
Case applies this figure to implications for first time buyers to deliver advice for those entering the market for the first time. He cautions against buying a house that is unaffordable at the current level of salary; in addition, a quick profit should not be expected in the way of the current market. If the investment is not intended to be a long-term purchase, Case claims the home shouldn’t be purchased at all; those looking to simply turn over the property could find themselves waiting through long cycles of down market time.