Housing Bubble - Maybe, Maybe Not.
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The news on Monday was not good. It looked, in fact, like the housing
boom was over and that was the thrust of a lot of the media headlines.
Not that a market crash seemed likely, but it did seem as though the housing
bubble had developed a tiny little leak.
The National Association of Realtors released its monthly report on the
sales of existing homes for the month of October and NAR figures showed a "moderate"
decline in activity for both single family homes and condominiums. Total existing
home sales including single-family houses, condos, townhouses, and co-ops were
down 2.7 percent from September figures to a seasonally adjusted annual rate
of 7.09 million units. September sales had been at a rate of 7.29 million. This
rate still put sales 3.7 percent above the seasonally adjusted sales figures
for October last year.
Condo/co-op sales took most of the hit, dropping 4.4 percent to a seasonally
adjusted annual rate of 862,000 units from the 902,000 logged in September.
Sales, however, were still stronger than one year ago, running 6.7 percent above
October 2004 levels. Single family houses were actually only down 2.5 percent
from the previous month and were 3.3 percent above October, 2004 figures.
The median single-family home price in October was 216,200, 16.6 percent higher
than one year ago and the median price for condos was 229,800, 15.3 percent
more than one year ago.
Three of the four regions of the country saw sales decline less than 2 percent
and all showed substantial increases from October 2004. The Northeast, however,
declined 7.4 percent from September to October and was flat compared to October
2004. All four regions, including the Northeast, had median price appreciation
of at least 10 percent since last year.
Housing inventories (homes sitting on the market unsold) were
up 3.5 percent at the end of October to 2.87 million units. At the current rate
of sales this represents a 4.9 month supply of housing.
David Lereah, Chief Economist for NAR stated that the drop in sales and rise
in inventories "signals that the housing sector has likely passed its
peak. Make no mistake," he said, "slowing has occurred and we expect
further cooling in coming months." He projected that the year would end
with record total sales of 7.11 million but would slow to 6.86 million in 2006.
Well, that was Monday. On Tuesday the U.S. Census Bureau and the U.S. Department
of Housing and Urban Development released their monthly report of new
residential sales for October. The preliminary estimate of sales for
the month, 1,424,000, was a huge jump - 13.0 percent - over
the revised September rate of 1,260,000 units and was 9.0 percent above the
estimate for October, 2004. The median price of a single family house sold in
October was $231,300. There is an inventory supply of 4.3 months at the current
sales rate.
As usual there was considerable disparity from region to region. Both the Northeast
and the West recorded increases of over 40 percent while the South barely eked
out a 1.9 percent improvement over September and the Midwest lost 9.5 percent.
So is the housing market slowing or surging? There is probably no point worrying
about the NAR figures as one month does not make a trend and as the two surveys
use different methodologies the disparity is not unusual.. The stock market,
however, reacted strongly to the HUD/Census Bureau report with homebuilding
stocks rising sharply early in the day.
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