3rd Quarter Real Estate Sales Offer Interesting Revelation
By now you’ve probably noticed you can’t escape discussion of a slowing or even crashing housing market in the United States. Rising foreclosures and tighter lending standards for mortgages are some of the reasons for this.
Housing bears and bubble bloggers argue there is no way out except for a lot of pain and severe house price drops. I submit the solution isn’t so one sided and the third quarter numbers released yesterday attest to that.
The National Association of Realtors report showed -
The median single-family house price in the United States fell to $220,800, which was down 2 percent from a year ago. Condo prices showed some resiliency: At $226,900, they rose 2 percent compared with 12 months ago.
Yes, housing prices for single family homes went down on a national level
and I suspect they will continue to do so for much of the coming year as excess inventory in Florida, California and Nevada continue to work through the markets. Did you notice condo prices increased? People are still buying these types of properties and they’re continuing to appreciate. To be fair, the “subprime” meltdown didn’t really have a far reaching effect until August, so this data could be skewed a little. 4th quarter numbers will provide greater insight.
Another factor to be aware of is the downturn hasn’t affected all areas of the country equally. In fact, the hardest hit areas are those that had excess speculation or systemic economic problems.
Most declines occurred either in once hot markets or Rust-Belt areas clobbered by economic setbacks and job losses, like Detroit and Cleveland.
In Salt Lake City, we are still enjoying house price increases, though the volume of the sales has decreased. Pat Kitano points out “market bifurcation” is happening all over the world.
In the heartland, Bismarck, N.D. prices were strongly positive with a growth rate of 15.1 percent to $161,600 compared with a year ago, . Salt Lake City also recorded a big gain, with prices up 14.1 percent to $246,700.
Even in Salt Lake some areas are doing well, while others have gluts. What to do, what to do?
We’re still in wait and see mode. The depth of the subprime writedowns just became known in August. The numbers released yesterday cover only July - September. In the mean time two other factors are working into buyer’s favor. Employment continues to be strong and stable, even in the construction sector where October’s starts exceeded expectations. Further, the benchmark 10 year bond has dropped to 2003 levels and fixed mortgage rates are mirroring the drop. The Fed looks even more likely to provide another interest rate cut when it next meets in December.
When all these factors are considered, across the board housing price drops don’t have to be the only way out, but it’s still too early to tell.