Released November 18, 2009
RALEIGH, N.C. – There's optimism about the housing market. This is crucial, because most experts say we need a healthy housing market for the economy to recover. Is the housing market back?
Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"A little bit of background, everything in economics comes down to supply and demand. The problem we had in the housing market was too much supply relative to demand.
When the economy went into recession - part of that was caused by the housing market - but demand really fell. People were not buying homes. We still have the inventory out there, the supply. And what this did was put downward pressure on housing prices.
In many markets, housing prices have fallen at well over a double digit rate. Now though, we've had enough time for the housing market to in some sense self correct. That is to say, builders didn't build any more homes, so that brought the supply down, and people took advantage of lower prices as well as, for example, the $8,000 tax credit for new buyers to increase sales, and so now we have the supply and demand lines, if you will, at a much more equal level.
So that gap between supply and demand has definitely shrunk, and that's why housing prices are stabilizing. But there are a lot of questions about whether this will be maintained. We still have very high unemployment. We still have foreclosures going on. We have the $8,000 tax credit expiring at the end of November. So although the housing market certainly is back and better than it was a year ago, there are questions about whether that health will be maintained."
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http://www.ncsu.edu/project/calscommblogs/news/archives/2009/11/economic_perspe_493.html
