Home prices drop; 1st time in a decade

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Millionaire Now! by Larry Nusbaum

This blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth".

Home prices drop; 1st time in a decade

Posted on 09/26/2006 11:03 AM | Link | Post Comment

Thanks to Barry Ritholtz' The Big Picture:
1. Real Estate Sales Slump Generating Ugly Press
2. Home Prices Drop; 1st time in a Decade

Some observations:

"What worries me is how long we can sustain consumption on the basis of what we have sustained it in the last several years: by taking money out of your house,'' Joseph Stiglitz, Columbia University economics and Nobel laureate, said in an interview Sept. 22." - That may be true, but according to a national association of financial planners, personal balance sheets have never been in better shape.

"There has never been such a quick deceleration in price appreciation," Stiff said. "I was looking at data from 1969 forward, and it's unprecedented." - True. But, there has never been such an extended period (8 years) of accelerating price appreciation preceding it.

Existing home sales weakness is similar to the New Home Sales report last week , which showed construction plunging by 6% in August; New Home Building activity has returned to leves seen in 2003. - This is exactly one of the two ways in which new home build inventory is worked down! The other, which is working well, is the hige incentives given on spec homes and those where people walked away from their deposits.

"Just ask the chief economist for the realtors group: 'The price correction is a welcome development,' he said, because it stops the bleeding. 'Sales have hit bottom,' he said. 'Sellers are finally getting it.' " - He does not mean "bullish" for the housing market as so many have observed. He meant what he said, meaning that price reductions by sellers would be welcome by the realtor community so that they have a chance to sell their listings, thereby reducing inventory and making commissions.

Economist Dr. Nouriel Roubini was aksed: Will there be a fire sale in the city? "I’d expect prices to be 5 to 10 percent lower a year from now, on average. On the national level, real home prices may fall 20 to 30 percent. " - That's so funny, it isn't even funny. All real estate really is local. My guess is that had he not been an owner he would have predicted a crash for NYC housing! NYC, SF and LA are amongst the most expensive housing markets in the country by any method of measuring. But, Dr. Roubini sees less stress where he owns (5-10%) than the rest of the country. BTW, he has been bearish on housing for 3 years.....

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