The Housing Mirage

Prices are up, but the market is far from healthy. We’re missing key elements of a true recovery.

If housing is back, why is the percentage of people who own homes lower now than it was over a decade ago? That’s one of the many paradoxes of the housing recovery that’s ostensibly under way in the U.S. It’s true that home values began rebounding from their post-financial-crisis trough 15 months ago. The latest S&P/Case-Shiller index data show the largest monthly gain in home prices since 2005. But the percentage of Americans who are homeowners is still declining from its peak in 2004, the market is bifurcated (sections of Washington and Los Angeles are booming, while Detroit and California’s Inland Empire are still coping with foreclosures and homes with mortgages that are underwater), and the federal government is underwriting nearly 9 out of 10 new mortgages via a multitude of state-sponsored programs and federally backed bonds. If a healthy housing market is one that is inclusive and not dependent on government support, “we’re a long way from there,” says Yale professor and housing expert Robert Shiller.

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