Detecting a change in attitude among both buyers and sellers — not to mention what is now a three-month increase in the benchmark price indices that bear his name — economist Karl Case believes the housing market has hit bottom.

Not that housing is ready to bounce back with a vengeance, but at least it is no longer in a free-fall, the co-founder of the S&P Case Shiller indices said at the New England Mortgage Bankers Conference in Providence, R.I.

"We're not going to come roaring out of this," said Case, who has been teaching economics at Wellesley College for more than 30 years. "We'll come out of this slowly. There will be some bad days and good days, but the mood began changing in March."

The economics professor cited several signs that a recovery has begun, including a 25% increase in housing starts since April and "the best number of all," a sharp drop in unsold inventory of new homes. The huge number of completed but unsold houses has "been a real drag" on the market, he said. "The building industry has been getting killed like it's never been killed before," he said.

But Case also warned that if he is reading the tealeaves incorrectly, the mortgage market could take another hit. If housing continues to falter, the economist said, "then we are writing bad paper now."

To illustrate just how far the housing sector has fallen, the economics professor pointed to housing starts, which nosedived from 2.273 million units at the peak of the cycle in January 2006 to 598,000 units in August. That decline cost the economy roughly $588 billion, or 4.2% of GDP, he said.

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