Commentary Magazine


Housing Makes a Comeback

The housing market, which was the epicenter of the recession that began in 2007, is bouncing back. The Wall Street Journal reports that housing prices in March were up 10.2 percent from a year earlier, the best such figure since 2006, when housing prices began to collapse. Home sales are also up from a year ago, by 9.7 percent, and houses are selling more quickly, according to an earlier Journal story.

This is good news for the economy as a whole, reflected in the fact that the Dow Jones Industrial Average hit a record high yesterday and yields on treasuries rose sharply (which, of course, causes bond prices to fall).

For most families, their home is their biggest investment, so when housing prices are rising they feel richer. And people tend to increase spending when they’re feeling rich. That boosts the economy generally.

But while this is, certainly, good news, the economy is not yet booming by any means. Unemployment remains stubbornly high. The Federal Reserve continues to keep interest rates very low and is still injecting $85 billion a month into the economy by buying federal bonds and mortgaged-backed securities. Only when the Fed begins the very tricky task of paring down its balance sheet and letting interest rates rise back to more normal levels will we be able to say the Great Recession is well and truly over.