A May 2009 increase of 0.5% in the closely watched Case-Shiller home price index indicates that the US housing recovery is seen possible now. Prices tumbled more than 32% from their peak in 2Q 2006. Case said that prices may be at the bottom now.
· Preventative risk--management must be a priority going forward, according to Shiller.
· He also stated that the mortgage contract structure must be made to protect home-buyers in case of a downturn. “The new standard for mortgage should be a continuous work-out mortgage,” so that “if home prices fall then your mortgage payment will go down.”
· Shiller cautioned that recent bank bailouts were “extraordinary events that we should want to prevent as much as possible in the future.”
· In June new home sales jumped 11%, the biggest monthly gain in 8 years according the US Commerce Department.
· National association of Realtors said existing home sales rose for the 3rd straight month in June.
But, with unemployment and foreclosures still rising, caution was advised. Shiller said that confidence in the US financial system is crucial for an economic recovery, and can be best restored by having a clear regulatory framework for investors. He mentioned that foreign investors who were thinking about putting money in this country are feeling somewhat less assured.