Issue of the week: Has the housing recovery arrived?

Will housing, which dragged the economy into a brutal recession in 2007, now pull the economy out of it? asked James Cooper in BusinessWeek. There is mounting evidence that momentum for a recovery is building in this key sector. Single-family housing starts rose 1.7 percent in July, to their highest level since last October, and sales of existing homes have risen 7.7 percent since touching bottom last November. Prices are leveling off, and in some cities, including Denver, Boston, and Chicago, they have even turned upward. But with millions of Americans out of work and foreclosures still on the rise, “it’s clear that the road to a housing recovery will be a long one.”

That’s assuming there will be a recovery at all, said Brett Arends in The Wall Street Journal. Look “beyond the headlines,” and you’ll find plenty of reasons for doubt. The recent pickup in housing-market activity may not be sustainable. In fact, given that Washington is goosing the market with “not one, but two gigantic taxpayer subsidies”—low long-term interest rates and an $8,000 tax credit for first-time buyers—it would be a surprise if the housing market had not improved. If interest rates go up, sales could wither. “And the picture on inventories isn’t as good as it sounds, either.” In some of the hardest-hit regions of the country, including Miami and Detroit, would-be sellers have pulled their homes off the market and offered them for rent instead. So those regions must now contend with a glut of rentals in addition to an oversupply of homes for sale.

If the personal choices of some housing experts are any guide, it’s still not the time to buy, said Peter Hong in the Los Angeles Times. Mark Kiesel, a money manager at mutual fund giant Pimco, started placing financial bets against the housing market in 2006, the same year he sold his Newport Beach, Calif., house and moved into a rental apartment. He plans to rent until home prices are 50 percent below the peak they hit during the bubble. “We’re not there yet,” he says. Likewise, UCLA public policy professor Mark Kleiman “thinks the safe position” is to hold off buying for now. Prices in his West Los Angeles neighborhood “are still above what incomes can realistically support,” and he’s prepared to continue renting for years, if necessary.

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That attitude could be catching on, said Thomas Sugrue in The Wall Street Journal. As foreclosures spread and many homeowners struggle to stay current on their mortgages, Americans are starting to doubt the “gauzy platitudes about the character-building qualities of homeownership.” Touted by presidents all the way back to Herbert Hoover as the surest route to wealth and respectability, homeownership has been exposed as a mixed blessing, at best, and for many, it’s a financial catastrophe in the making. If the real estate bust has taught us anything, it might be that it’s “time to downsize the dream, make it a little more realistic.” There’s no shame in renting.