Case Says Housing Starts `Dead Flat in the Mud': Tom Keene

The U.S. housing market “is still bouncing along the bottom” as vacancy rates outpace historically low construction, said economist Karl Case, co- creator of the S&P/Case-Shiller home-price index.

The S&P/Case-Shiller index showed today that home prices in 20 U.S. cities rose 3.8 percent in April from a year earlier, the biggest year-over-year gain since September 2006. Sales got a boost from a tax credit aimed at reviving the industry that triggered the worst recession since the 1930s.

While the report was “fairly positive,” Case said, home building, which has driven the economy during past economic expansions, “is dead flat in the mud.” Housing starts have been at 15-year lows for the past 18 months, and vacancy rates are increasing, he said.

“The unwritten story here is what’s going on with household formations and the pattern of them,” the Wellesley College economics professor said today in an interview with Tom Keene on Bloomberg Surveillance. “The census is telling us that households are being formed, but they don’t seem to be showing up.”

Case attributed this disconnect to fewer immigrants and more emigrants, as well as the “doubling-up phenomenon” where more people choose to live together or reside with their parents.

California Effect

Compared with the prior month, 18 of the 20 areas covered in the S&P/Case-Shiller home-price index showed an increase on an unadjusted basis for April, led by a 2.4 percent gain in Washington and a 2.2 percent increase in San Francisco. Miami and New York were the only two cities showing a monthly decrease.

San Francisco could be reviving the U.S. housing market, Case said, if it is able to propel California, which comprises 25 percent of the national market. California accounted for the most national foreclosures during March, April and May.

“Some of the institutions out there were lending money at rates that were beyond belief,” Case said. “If we can stabilize that market alone, it will help a lot.”

Case is retiring tomorrow after more than 30 years at the Wellesley, Massachusetts-based college.

To contact the reporters on this story: Alex Kowalski in New York at; Tom Keene in New York at

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