Released February 4, 2010

RALEIGH, N.C. – Most economists agree the recession started in the housing market. We had unsustainable increases in housing prices followed by a steep drop in those prices. Recently housing prices seem to have stabilized. Does this mean the market is back to, as economists say, equilibrium?

Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"I think I would tentatively say yes, although it does depend on what measure you look at. One indicator that economists track is the ratio of house prices to rents. And that skyrocketed during the housing boom. It has now retreated and by some measures it is back to normal.

"Another indicator suggests however that housing prices still have a little bit to fall, maybe about 15 percent. If that's the case, then that means in some markets housing prices would have been almost cut in half during this economic recession.

"But the good news does appear to be that the worst of the declines, if we still have some declines in housing prices to go -- the worst of them, the biggest chunk of them -- are over.

"Another piece of good news is that we are actually doing better in our country in terms of the housing market than in some other countries, like Spain and England and Ireland, where housing prices still appear to be widely overvalued. And so they are going to see further drops in those housing values."

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http://www.ncsu.edu/project/calscommblogs/news/archives/2010/02/economic_perspe_546.html