If you are thinking about buying - don't try and catch a falling knife - you'll probably end up with a nasty cut. Most analysts are not expecting housing to stabilize until 2009 at the earliest. The length of the "down-cycle" has a lot to do with the length of the "up-cycle," which leads me to believe that even these estimates are too optimistic. We had a 4-year boom... we may have 3 years left in a 4-year bust.
Why? Unlike stocks, people are very slow to take losses on their houses. They'll just "rent it out" until the market "comes back." These people represent "phantom inventory" that will jump into the market at the first sign of strength... creating even more downward pressure on prices. By not getting out when the can, these people end up riding the market all the way down to the bottom. To add insult to injury, they usually can't cover more than 60% of their "carrying costs" with rent, so they are losing money every month even as their house declines in value.
Let's make this another chapter in the vanquishing of the "housing tragedy" that locks young families out of homes in order to further enrich baby-boomers, whose national debt we'll have to repay in addition to funding their retirement.
Existing-Home Sales Tumble 8%
October 24, 2007 10:04 a.m.
WASHINGTON -- Demand for previously owned homes slid more than expected in September amid continued problems in the mortgage market, with single-family sales hitting their lowest sales pace in nearly 10 years.
Overall home resales declined to a 5.04 million annual rate, an 8.0% decrease from August's downwardly revised 5.48 million annual pace, the National Association of Realtors said Wednesday.
The August existing-home sales level came in well below Wall Street expectations for a 5.25 million rate.
The 5.04 million pace is the lowest since the association started accounting for combined single family and condo sales in 1999. Based on single-family sales of 4.38 million, the September figures are the weakest since January 1998.
"The credit freeze in August definitely impacted sales in September, particularly the jumbo [loan] side, so we have seen a large sales decline in the upper end of the market," NAR senior economist Lawrence Yun said.
The median home price was $211,700 in September, down 4.2% from $220,900 in September 2006. The median price in August this year was $224,400.
Mr. Yun said conditions in the jumbo loan market have improved, so he still expects 2007 to rank as the fifth-best year in terms of existing home sales. Prices are expected to ease about 1.5% from record high of last year of $221,900.
Inventories of homes rose 0.4% at the end of September to 4.40 million available for sale, which represented a 10.5-month supply at the current sales pace. There was a 9.6 month supply at the end of August, revised down from a previously estimated 10.0 months.
Existing-home sales tumbled in all regions. Sales dropped 7.0% in the Midwest, 10.0% in the Northeast, 9.9% in the West, and 6.0% in the South.
The average 30-year mortgage rate was 6.38% in September, down from 6.57% in August, according to Freddie Mac.
Write to Tom Barkley at firstname.lastname@example.org