Monday, October 03, 2005

BOMB POP: Nation's Hot Spots Cooling

This is a big deal.

The New York Times is reporting that home sellers in the hottest markets across the country are growing in number, and that their "For Sale" signs are staying out longer. The story also says that although home prices continue to increase in these hot markets, the rate of ascent is slowing. All this is according to reporters David Leonhardt and Motoko Rich of the New York Times, whose front-page story in Wednesday's paper gives the blow-by-blow account. Here's an excerpt:
A real estate slowdown that began in a handful of cities this summer has spread to almost every hot housing market in the country, including New York.

More sellers are putting their homes on the market, houses are selling less quickly and prices are no longer increasing as rapidly as they were in the spring, according to local data and interviews with brokers.

In Manhattan, the average sales price fell almost 13 percent in the third quarter from the second quarter, according to a widely followed report to be released today by Miller Samuel, an appraisal firm, and Prudential Douglas Elliman, a real estate firm. The amount of time it took to sell a home was also up 30.4 percent over the same period.

In another sign that the housing market might have reached a peak, executives at big home builders have sold almost $1 billion worth of company stock this year. [Page C1.]

Outside Washington, in Fairfax County, Va., the number of homes on the market in August rose nearly 50 percent from August 2004. In the Boston suburb of Brookline, Mass., where many three-bedroom houses cost $1 million or more, the inventory of homes for sale has increased in just the last few weeks, said Chobee Hoy, a broker there.

For-sale listings have also swelled throughout California, according to the California Association of Realtors. In the San Francisco Bay area, they have increased 16 percent in the last year, Coldwell Banker Residential Brokerage said.

"We are seeing a market in transition," Leslie Appleton-Young, the association's chief economist, said.

Brokers said that some houses seemed to be on the market longer because sellers priced them too high, assuming that their value was still rising sharply. In other cases, people who otherwise would have waited a year or two to sell their homes - like empty nesters ready to move into smaller quarters - had listed them now out of fear that prices would soon fall.

The question remains whether all of this represents a momentary cooling off of some overheated housing markets, or it presages a more pronounced downturn that would end a decade-long boom.

Some economists and commentators have for years predicted the bursting of a real estate bubble, and previous slowdowns have turned out to be relatively brief pauses before prices started accelerating again.

But with mortgage rates now rising, the cost of gasoline hovering at or near $3 a gallon and house prices in some areas out of reach for many families, brokers and analysts said they thought that this slowdown could be the real thing.

For now, the change remains a far cry from the bursting bubble that some have predicted.

In Massachusetts, for example, the median house price remained flat from July to August, and the median condominium price fell only slightly, according to the Realtors' association there. At the start of the year, prices had been rising at an annual rate of more than 15 percent.

If anything, some brokers said, the recent slowdown meant a return to a healthier, more sustainable market.
Read the entire story at this link.

— The Boy in the Big Housing Bubble