Half Full or Half Empty?:

Empty:Inman Real Estate News: New home sales drop 7%: Inventory levels climb from a year ago

Full: Industry Week: New Home Sales Rise

3/4 Full: CNN: New home sales soar: March gain of 13.8% the biggest in 13 years, showing surprising strength in housing market, but that was partly driven by builders cutting prices. Marketwatch: Stunning 13.8% increase in new home sales: Median prices down year-over-year first time since Dec. 2003

Both: USA Today: New-home sales leap in March, but prices fall

SenatorX (mail):
Slashing prices on new homes to increase sales is not a sign of growth. Inventory is still up which is another bad sign. Costs are up and so are interest rates so more people than ever are going to look to sell. Pop goes the bubble. I am with the half empty crowd on this one. People who are trying to fudge the stats to lure the last suckers are evil.
4.26.2006 4:55pm
Real Estate Ponderer:
Agree with SenatorX mostly. We'll not likely get a "pop" like we did with .coms though. Likely to see a slow stagnating.

The recent increases (last 2-3 years) in R/E prices will be seen as a response to excess liquidity and the resulting inflation that the Fed has allowed to occur by keeping rates so low for so long. (Gold and Oil are also showing this inflation, though wages are lagging)

Rates are still historically low, so Fed still has room to raise before hindering access to money. Yet, now that the Fed is tightening, slowly but surely, the growth in home prices should slow to historical levels (3%/year) reflect higher cost of money.

Caveat: Potential for a "pop" in certain desirable markets, where speculators own significant inventory. If speculators make mass exodus, could be trouble.
4.26.2006 5:37pm
Grant Gould (mail):
Stagnation is usually the rule with houses, because people who don't like the market can delay selling. But it's a rule that's likely to be tested hard.

Stagnation could turn into a pop pretty quickly if interest rates continue to rise and the economy takes a turn for the worse: People in bubble-oriented mortgages could get pinched hard and, unable to refinance, could be forced to sell even at low rates. That would increase volume even at the lower prices, sucking what little life remains from the high end of the market.

Watch out for unemployment numbers. Keep an especially close eye on foreclosure rates. A bump in either of those could herald a serious pop in the bubblier urban markets.
4.26.2006 6:08pm
Joel B. (mail):
Who really knows, building homes is more expensive than ever, the prices of lumber are up substanially, prices of concrete, steel, everything is up a huge amount. Inflation is also bearing at the door, the one advantage of a home, is that it is one very large "hard" asset that people own. As inflation seems to be at the bay can home prices really crash? Are homes prices going to decline at the same time the underlying materials only become even more expensive?

Maybe that's the real question, in many areas residential rents are starting to go up quite susbstantially, I know of places in Silicon Valley where a 1 year lease charges $200 MORE a month than Month to month, that can only mean the lessor intends to raise rates quite substantially over the next year...for people predicting a bubble burst can we be sure that accelerating rents and real costs will not catch up to a somewhat stagnant housing market? And somewhat soon at that?
4.26.2006 6:31pm
John Thacker (mail):
Although, oddly perhaps, even the "half empty" link given notes that inventory is down relative to last month (but up compared to last year).

Of course, since the bubble was a localized phenomenon in certain hot markets, the easing of the bubble is as well. Hence averaging over the whole country smooths out the shocks. In other words, any slowdown in these numbers probably reflects a much larger slowdown in the hot markets like northern VA.
4.26.2006 6:32pm
narniabound (mail):
ACK. Housing bubble, please don't pop until late next summer, please! I will be moving next year!
4.26.2006 7:03pm
Fishbane (mail):
Caveat: Potential for a "pop" in certain desirable markets, where speculators own significant inventory. If speculators make mass exodus, could be trouble.

I'm hoping for one. I'll soon be in the market for a home in a desirable market (NYC, although I'd move back to SF as well if there's a better deal there). But then, almost none of my business revenue comes from local sources.
4.26.2006 8:07pm
DRMPro (www):
Is the bubble finally popping?
4.26.2006 8:45pm
Real Estate Ponderer:
To Grant Gould:

The likelihood that the economy will sink seems low. Energy prices are high, but a portion of that increase is attributable to existing inflation. After the last rate hike, the 10yr note yielded less than the short-term rates, which was a cause for concern. Since then, however, bond rates have righted themselves, dropping the likelihood of recession. Of course, geo-political events could change what has been a good trend.

If the Fed can contain inflation with reasonable interest rates (< 8 or 9%), we should avoid too many foreclosures, though I agree that those who have interest-only, 1-yr ARM, and "amortized" mortgages will be in trouble.

That leads me to agree with the "soft-landing" hypothesis for at least most of America. The "frothy" markets are another story.
4.26.2006 9:38pm
getloose (mail):
I would trust Inman's figures. They are the premier news organization for real estate industry coverage, and have the best sources at the National Assn of Realtors, which has the best data.
4.27.2006 1:31am
Housing bubble, please don't pop until late next summer, please! I will be moving next year!

Have no fear, based on past experience, after housing bubbles pop it takes something like 5 years for prices to hit bottom.
4.27.2006 11:02am