Wednesday, 25 August 2004
“It seems that the housing party is over”
Today’s Wall Street Journal has an article, “Hot Housing Market Simmers Down.” I can’t reference it directly because I’m not a subscriber, but it basically notes that, according to the Association of Realtors, existing single-family home sales declined 2.9% in July, while in California the housing inventory has increased to 3.3 months, surpassing three months for the first time since February 2003.
Of course, the Realtors are trying to spin this like crazy (hint: just because “inventories are depleted” doesn’t mean that everything’s OK).
Melbourne’s Age reports (registration required) the Commerce department’s new home sales figures, which are down 6.4% from June. This is apparently a steeper drop than expected, leading to interesting quotes like the one from Wachovia above.
Greenspan, meanwhile, notes that “ House prices are difficult to measure.” Fair enough, but that doesn’t mean that you can’t measure the housing market at all (the Reserve Bank of Australia has a enlightening report on this subject; while some of it is AU-specific, a lot of the material applies elsewhere too).
Looking ahead, there was really interesting opinion piece in yesterday’s Journal from Karl Case and Robert Shiller (of Case Shiller Weiss fame, I think; these names keep on coming up regarding real estate economics), called “Mi Casa Es Su Housing Bubble.” They have some interesting things to say about how a deflation would play out. One juicy bit;
Over the last 30 years we have learned a good deal, much of it from our own research, about how downturns in the market play themselves out. If rates continue to rise and the economy stalls, housing demand will drop and, assuming that housing markets behave as they have historically, the markets will adjust slowly. …[T]he “bid-ask” spread widens, time on the market increases, fewer deals get concluded and home sales drop.
Finally, check out “How to Stop Relatives From Bragging About Their Big Profits in Real Estate” in today’s Journal (once again, no link — how boring). Good stuff.