Is it the End of the Recession?
“Some signs suggest that the recession is lifting. America’s housing bubble seems mostly deflated. According to the S&P/Case-Shiller 20-city index, house prices through January were down 29% from their all-time peak. Relative to incomes, houses are now 10% undervalued, and relative to rents they are fairly valued. This is luring buyers back. House sales rose unexpectedly in February while vehicle sales rose by 8% in March. Even new claims for unemployment insurance have stopped rising.
What has brought this turnabout? In part, the normal corrective powers of the economy. Annualized housing starts are about a quarter of the rate needed to support the forming of new households, so sooner or later we will see a strong rebound. The improvement is also the expected response to monetary and fiscal stimulus, both of which have been exceptionally aggressive. The Federal Reserve, having lowered short-term interest rates in effect to zero, has intervened in bond markets to push down long-term mortgage rates as well.”
At least now we have a financial publication saying things are going to turn around. If we can’t trust the media, who can we trust?