If you read this AP Report you might think so. Especially if you pay attention to this paragraph:
The drop in new home sales followed news Thursday that sales of previously owned homes actually rose by a stronger-than-expected 5.2 percent last month following five straight monthly declines. Analysts said the trend in both reports pointed to a slowing housing market after five record-setting years.
If you stick with AP and check what they said yesterday you still have a little queasy feeling:
"This is one month's data in a volatile series and does not give the whole picture on housing," he said. "We may see this unwind in April when the March numbers are printed."
But if you engage in that mysterious practice known as 'simple mathematics' and subtract last years numbers from this years numbers for both series you find that the total number of new and previously owned homes which changed hands in February is 223,000 greater than last year - or an increase of 2.9%.
AP once again displays the gentle art of negative propaganda - an increase of 2.9% translates to a "slowing housing market". It's really just a matter of timing. The headline in 1996 would be "Overall Housing Market Growing At A Sustainable Pace".
10 comments:
Well sooner or later...
I had a real estate license for awile and the housing market was never all that hot here, in fact there were too many realtors.
But over all the prices have just gotten out of hand. Housese are too big and too expensive. I think we might start to see the comeback of the bungalow. About 1100 sq feet and very efficient in terms of energy usage. That would make a lot more sense.
Any time a new roof can cost $20 thousand..the house is too big. I was always dealing with people who never thought about things like property taxes, upkeep, heating and cooling etc. So I would not be surprised if things did cool down.
Btw, That time of years is usually slow. We started seeing more folks come in to look for houses in April, sometimes March.
Terrye,
There is no doubt that there are hot spots where prices have risen at a rate that is unsustainable. The national market tends to even those off quite a bit and the pace of existing home sales is being driven by demographics as much as by anything else. The number of people retiring is a "known" factor, as is the fact that retirement often means downsizing, if not relocation. The first surge in people hitting 65 (about a 300K increase) occurs this year but then it settles down until '11 when there will be a 500K single year pop. Housing demand will turn down a tad from '08-'10 but the market from '11-'15 is going to be a barn burner.
Rick:
The houses costs too much money. There was nothing unusual about me helping someone get a house and then seeing them file bankruptcy two years later.
The houses are too big, too expensive, and out of the range of most people. How many of these houses are bought by people who spend the entire income of one person in the household on a house payment? It is just ridiculous.
I would take some young couple out and point out that they could buy some nice older house, build up equity and then sell and move onto something new....but noooo, they just had to hit up Mom and Dad for the down payment, get a 90% mortgage, buy a lot of furniture and go broke.
I live in a small place about 1100 sq ft and [gasp] I own it. Now people have tried to get me to buy something bigger and nicer with better resale value but I don't want to be making house payments until I die.
And some people really are better off renting.
Hey, mud huts aren't so bad. My old farm house was so NOT level, that if I spelt something on the kitchen floor I had to beat it to the corner to wipe it up.
Many houses are very expensive, but homeownership rates in the US are up fairly steadily from 1965 till now. Average ownership rate in 1965 was approximately 63% and now it is approximately 69%. A greater proportion of the population can afford to own a home.
I think Rick's comment about the wording of headlines is spot on and very important. Many people do not read the stories or do not read deeply into them, so headlines are used by many readers as the "essence" of the story (and often as the "truth").
Here's an interesting paper predicting the direction of the housing market for the forseeable future. You might just want to scroll to the end for the graphs, unless you really like the technical details of asset pricing models.
It predicts a long-term decline in real housing prices, and views both the current run-up and the future decline as demographically driven. I'm planning to do a post on it.
Sorry, I meant to add...
See especially figure 8a.
That should be an interesting post. He seems to be making some assumptions that presume a level of stasis outside the factors that he wants to look at that may have an effect on his models relationship woth reality.
Constructing a model where actual cost and final price aren't related enters into the realm of entertainment.
I live in two very hot housing markets.(Washington DC and Longboat Key Fla.) When the market levels off all it means is it takes longer to sell houses. Prices rarely decrease substantially except for those in an unfortunate position of having to sell fast at those times.
Some increases are due to rising expectations--people simply want more house than our parents thought necessary.
Some are due to restrictions on land use.
OTOH, in Washington the smaller sizes of families, the agita of commuting and the attraction of living in the city(even where private schooling is expensive and necessary) means houses in the city continue to sell faster than the chateaus in the burbs..If this is true elsewhere it might explain why resales are selling faster than new home sales. New homes tend to be further and further away from work.
Clarice,
It rained in the Bay Area every weekend in February plus the first two weekends in March. The weather was also lousy in SoCal. That had an impacth that the top article neglected to mention. The key housing month is generally considered to be April - we'll see then.
I'm interested in seeing Morgan's analysis of that study.
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