April 26, 2005
-- by Dave Johnson
You probably saw the news today, New Home Sales Hit Record High in March. But did you see this, buried in the story?
The median price of a new home sold in March actually declined to $212,300, a 9.3 percent drop from the February level of $234,000.The Housing Bubble blog asks the important question,
Here is the question of the day; if new home prices fell 9% in March, does that mean those who bought in February are already underwater?"Underwater" means the house is already worth less than they paid for it. Remember, everyone is depending on the price of houses continually rising to justify the enormous payments they are making on the loans they are taking out.
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I got a buddy, a high school chum actually, in the game - builds spec houses, floating about two and a half million bucks right now. In the middle of a five house project, two built, neither sold, one about half built... the other two on hold as a couple of years ago I adamantly ripped his ear over the notion that "growth", the "housing bubble", is a perpetual motion machine bound by all the laws of nature to fail. To implode.
Isn't the internets great!
Posted by: Thomas Ware at April 26, 2005 10:15 PM
From a recent Bloomberg story on the unexpected decline in durables orders:
Maytag, the third-largest U.S. appliance maker, said last week first-quarter profit slid 80 percent as costs for raw materials rose. The, Newton, Iowa, company slashed its 2005 earnings forecast as sales fell 4.2 percent from the same period last year.
This is at the bottom of the story. Earlier they only mention the costs increase, not the sales slump. Consumer durables SALES down. Hmmmmm.
Posted by: richard at April 27, 2005 10:09 AM
As I understand it, the drop in prices may or may not mean that people are under water or whatever. it may mean the mix of houses sold from one month to the next were on average lower priced houses. It may not mean that the prices of houses fell.
It also may mean that the houses selling today are the lower priced ones -- the higher priced ones may be taking longer to sell, which would indeed be a sign of a housing peak.
However, I'd be careful about concluding that a house that sold a month ago is worth on average a given percent less today.
Posted by: Phil from New York at April 27, 2005 11:27 AM
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