Thursday, November 12, 2009

Are Houses Really Finally Cheap?

By Lingxiao Li

A handful of early signs suggest America’s housing market is on the mend. Construction starts and new house sales were up nicely in June. Prices rose from April to May, the first monthly increase in nearly three years.

Time to buy, then? Perhaps, but be cautious about how and where you shop.

Some experts are no evangelist for the financial merits of homeownership. Two years ago they argued here that house prices in the U.S. had grown so bloated that renting had become a better deal than owning. An expert said:" Since then, prices have plunged 30%, or about 36% after inflation. Nationally, they still seem too high, as I’ll show in a moment, and May’s gain could prove illusory -- SmartMoney’s Aleksandra Todorova points out that it disappears after adjusting for seasonality, and that the numbers probably got a temporary boost from government freezes on foreclosure proceedings.

Still, a handful of major markets now look affordable, and all of them are closer to sane.

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