A Cloud No Bigger Than a Man's Hand
AP: "Housing construction cooled last month as the number of housing projects builders started plunged 13 percent. The decline is the biggest in nearly 11 years and it takes housing starts to a seasonally adjusted annual rate of 1.77 million units, the lowest level since May 2003. The Commerce Department also reports that a sign of future building slipped. Building permits decreased by 1.5 percent to a 1.99 million annual rate." And this: a 12% drop in new single-family home sales.
Comments (3)
I read a recent report by someone tracking current housing metrics & comparing them to historic trends.
Apparently the turning-point for US real estate values is going to come in June or July of 2005. Six months to sell or settle in for a long-haul.
That is, unless in the meanwhile Canada cuts off shipments of softwood lumber to retaliate for US protectionism...
Published: December 23, 2004 4:18 PM
It is a bit premature to take one month's number as evidence of the end of the housing bubble. But still, I don't think the end is very far away. The likely continuing interest rate increases by the Fed will at some point decrease the apetite for borrowing for housing purchases.
Household finances are so weak right now that when the Fed funds rate rises to 3 or 4%, the housing bubble is likely to end.
Published: December 24, 2004 7:42 AM
While new starts did, indeed, take a sharp drop, sales of existing homes reached their highest level ever.
Real estate may, indeed, be grossly overvalued and in line for a correction. I tend to agree--but have no way to actually know. Most don't realize that US real estate prices reached a high point somewhere around 1905 and then went into a decline that bottomed in the depth of the Great Depression and didn't get back to the 1905 levels until 1946-7 (and during which time money had become significantly inflated). My father remarked (at the time he bought a house in 1945 for $5000) that the price of the house was "high"--his father had paid the same price for a better house in 1905. But, in 1905, $5000 was 250 oz. of gold; in 1945, it was 140 oz. But today, people are quite commonly spending the equivalent of more than 1000 oz on more or less ordinary houses
(though they cannot be directly compared), which would indicate that houses may be overvalued (and gold undervalued).
Published: January 1, 2005 11:31 AM