The Real Estate Bubble- WTF?!?

    

“The genuine big one will arrive with a deafening pop, the sound of the real estate bubble bursting”- Nicholas von Hoffman- Oct 5, 2005- posted on The Nation

“We’re looking straight into the eyes of the biggest bubble in history.”- By Buck Hartzell (TMF Buck) October 26, 2005- posted on The Motley Fool

“Real estate booms have often become a bubble. It happened during the 1920s in the US, especially in Florida. It happened in Japan during the 1980s. And it is happening again now in the US.”- by Fred E. Foldvary, Senior Editor, The Progress Report- posted in 2004

Interesting Quotes that reflect a popular current theory, but are they accurate?

CNN Money posted an article on August 25th which states,

“Forget about a crash, they assured homeowners. Expect a “soft landing” where your three-bedroom colonial in Larchmont or Larkspur not only holds onto its huge price gains, but keeps appreciating at a “normal,” “sustainable” rate of 6 percent or so into the sunset.

Americans wanted to believe, and they did. Now, the giant popping noise you’re hearing is the sound of yesterday’s myths exploding like balloons pumped up with too much hot air.”

                   And the proof they provide? 

Nationwide, median prices rose .9 percent from June to July

                  (Sounds like a balloon exploding?)

July new home sales dropped from 1.11 in June to 1.06 Million

                   home_sales.gif

So, new home sales (the amount of new construction homes that are sold) are down from June to July, just like they are most every year, and they are down from their record-breaking pace of last year.

                           (Hear the explosions?)

According to the National Association of Realtors, the Pending Home Sales Index, which shows the level of existing homes under contract, released on September 1, 2006 indicates that “contracts signed in July were down 7.0 percent to a level of 105.6 from a downwardly revised reading of 113.5 in June…”

Now realize that “An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales”,

so…

Existing home sales in July were up 5.6% over 2001 levels.

NAR also reports that;

“Total housing inventory levels rose 3.2 percent at the end of July to 3.86 million existing homes available for sale, which represents a 7.3-month supply at the current sales pace.
Single-family home sales dropped 5.0 percent to a seasonally adjusted annual rate of 5.51 million in July from 5.80 million in June, and were 11.4 percent below the 6.22 million-unit pace in July 2005. The median existing single-family home price was $231,200 in July, up 1.5 percent from a year earlier.”

So, prices are up 1.5%, and home sales have dropped 11.4% from last year’s record setting pace, but are still up 5.6% from 2001.

Does this sound like the sound of exploding balloons to anyone?

Me neither…

 
 

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6 thoughts on “The Real Estate Bubble- WTF?!?

  1. Hi Greg,

    We cannot combine the entire country as one real estate market. Every market acts differently, some are still rising in value, and some have fallen in value. What will happen in the future is anybody’s guess. Speaking of the San Fernando Valley here in Los Angeles County, we have an increase supply of homes. I think we are coming to a balance between buyers and sellers.

    The good thing buyers have going for them now is that they are able to negotiate on the price of the home, buyers have more homes to see than before, rates are still low, etc.. The panic of making dicisions within hours is gone. No more overbidding, multi-counter offers etc…

    If your interested to learn the local market, contact the nearest Association of Realtors and ask for their charts and information.

    Sincerely,

    Richard Johnston, REMAX
    http://www.estates.la

  2. Greg,

    First off, Great Blog!

    Second, this conversation is one that I have had numerous times. And not just with clients! I have begun to console agents that the market is not as bad as everyone wants to believe.

    I offer a similar view to anyone willing to read over at S.E. Michigan Real Estate. As an added bonus, I throw in some quarterly and monthly area housing stats from our local board to emphasize the point.

    Welcome to the Blogosphere!

    Todd

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