Subscribe to our newsletter

US home prices may be rising, but it is too early to say that the housing market is in a full recovery.

US Federal Reserve policies that aim to push already low interest rates even lower does not fuel more demand for housing. Housing by its nature takes time to bottom, recover and gain momentum.

Seasonal factors can cause home price and sales data to move up, plus gains in parts of the United States may not reflect the broader national trend.

In a prior housing cycle, home prices peaked in Y 1990 and started falling, and it it took 10 yrs + for the market to start up again, this decline is only 6 ys old.

It may still be going down, and there are a lot of world economic problems that are headwinds in the US.

To stimulate the economy, the US Fed recently announced plans to buy $40-B in mortgage-backed securities held by banks every month until the economy and labor market improve, a monetary policy tool known as quantitative easing (QE-3).

Quantitative easing works by pumping the financial system with liquidity in a way that pushes down interest rates to encourage investing and hiring, though borrowing costs are already low, including mortgages.

The government wants you to buy, so now we are seeing mortgage rates at record lows. Inexpensive financing and low home prices may convince would-be home buyers to be patient and wait for things to go lower. This does not feel like an urgent time from my POV. Be patient.

US home prices rose 4.6% on year in August, the largest annualized increase in more than 6 yrs, according to CoreLogic, a private real estate data provider, which added that prices rose 0.3% in August from July, the 6th consecutive monthly gain.

The housing market’s gains are increasingly geographically diverse with only 6 states continuing to show declining prices,” said the chief economist for CoreLogic.