US House Prices Pick Up: Europe Will Follow

23.04.2009

The collapse in US house prices was the catalyst behind the economic crisis of our times. 

What happens then in the US housing market is very important. Alan Greenspan has said that the US recession will only end when house prices stop falling, and once the US recession comes to an end we start looking forward to pick up in Europe, too.

And of late there have been hints that things are improving. Yesterday saw what is perhaps the biggest hint to date.

According to the US Federal Housing Finance Agency, US house prices rose 0.7 per cent between January and February. It was the second biggest rise seen in 18 months.

Now, one month's rise does not make a trend. But the really significant thing is that the highest monthly rise seen over the same period occurred the month before.

When prices rise for two months in a row, it may be time to start thinking this is no longer a blip.

Of late, evidence has been mounting to suggest the great US housing crash is nearing its end, although the closely-watched Case Shiller index is still in sharp decline.

Yesterday, the IMF said it expects US house prices to fall by between 10 and 15 per cent, and Capital Economics also reckons the US housing market has further to fall.

It does seem, though, that the US housing market's crash has passed its worst. Sure, prices are likely to fall for a few more months, but before the recovery, expect a period in which prices fall most months, but rise from time to time. It seems we have entered that period.

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