Dwelling on the Good and Bad: U.S. Housing Prices at the Moment
A construction worker gestures on the roof of a home in Phoenix, Ariz. Home prices inched up in August from the previous month according to the Case-Shiller Index. Photo by Joshua Lott/Bloomberg via Getty Images.
Paul Solman answers questions from NewsHour viewers and web users on business and economic news on his Making Sen$e page. Here’s Tuesday’s query:
Name: Lynne Therriault
Question: This index shows large areas but unfortunately there are areas where the price of houses has gone up and no one ever points that out. In Silicon Valley (and Palo Alto, Menlo Park, etc. Calif.) the prices have gone up in a continuous curve. By always dwelling on the bad and not the good, it makes people feel worse than they should. I don’t believe in putting my head in the sand but I also don’t believe in making people so anxious.
Paul Solman: Should we point out that house prices on my old block in Brookline, Mass. have held firm as well? Of course there are pockets of prosperity. Fortune Magazine debuted in 1932, near the low point of the Great Depression. The Case-Shiller index is simply trying to sample the country as a whole. Chip (Case) and Bob (Shiller) are the nicest guys in the world, and would never want to make people feel bad or anxious gratuitously. They’re just reporting the general trend, as are we.
And the trend this month? Home prices in half the metro cities the index covers are up. Strikingly, Detroit is continuing a four-month trend in increased prices. Detroit! Same is true for the Midwest in general and housing prices nationwide are up for the fifth consecutive month. Good news? Perhaps. But average housing prices are also down from where they were a year ago. Another note of caution is the one we post here with our monthly unemployment U-7 figure: there’s a lot of variation month to month, so don’t take the numbers as gospel.
As to your original point about the media’s role in creating needless anxiety, it was Bob Shiller who vocally warned for years of the housing bubble. The warning may not have applied to Silicon Valley (though commercial space certainly plummeted for quite awhile). But would you have had him lock up his lips to avoid mass anxiety? Or should there have been a whole lot more Bob Shillers in the economics profession? Indeed, If there had been, might not we possibly have averted the bubble that was.