| The National Market | | | | if they don't get the price they want. Developers have |
| The latest report on third-quarter home prices, | | | | to drop prices to move inventory. Inventories rising |
| released in November by the National Association of | | | | Supplies of new homes are way up, to nearly 500,000 |
| Realtors, showed continued strength. But increasingly | | | | units, from 350,000 a few months ago. "That's an |
| there are signs that prices have reached a plateau. Of | | | | all-time high for new homes," says DeKaser. The |
| 147 markets tracked, 69 had gains from a year ago of | | | | higher the inventory, the more likely prices will fall. Sell |
| more than 10 percent -- only six metro areas | | | | times are up Houses are sitting on the market longer. |
| experienced declines. But from the second quarter to | | | | New homes now take about 4.1 months to sell and |
| the third quarter, the national median home price rose | | | | existing homes 4.7; both figures are up substantially. |
| to $215,900, up just 3.8 percent. That contrasts with a | | | | What to expectIn a recent survey, NAR members |
| 10.4 percent jump in the prior quarter. And more and | | | | say they predict home prices to rise only 5 percent in |
| more leading indicators are pointing to a slowdown. In | | | | the next 12 months. Nearly half of the realtors predict |
| Boston, real-estate investor Matthew Martinez reports | | | | prices will rise less than five percent and 6.4 percent |
| recently having spoken to five condo converters. | | | | actually expect prices to fall. "You can't expect |
| "They all said the party was over," Martinez said.In | | | | double-digit price increases to go on forever," said |
| Florida, Elena Filipa, vice president of the Corcoron | | | | Walter Molony, spokesman for NAR. "We're seeing a |
| Group in West Palm, said "We've leveled off. I would | | | | market in transition in which there'll be an easing of |
| say prices will go up this year, but not as fast as they | | | | price increases in the future." While DeKaser expects |
| have." None of this surprises the many economists | | | | a slowdown, he predicts an "orderly transition" for the |
| who have been waiting for a downturn. Richard | | | | most part, with some exceptions. "There will be busts |
| DeKaser, chief economist for mortgage banker | | | | in some markets," he said. "Mostly, we'll come out of it |
| National City, has been reluctant to call the top, but | | | | unscathed." For the most part, DeKaser doesn't |
| thinks it has finally passed. | | | | envision losses on that scale. He thinks home prices will |
| "We're coming down the other side of the mountain," | | | | decline 1.7 percent during the fourth quarter of 2005 |
| said DeKaser. | | | | and stay almost flat all the way through 2007. But |
| The signs include: Builder pessimism The builders | | | | history shows that some over-valued markets could |
| DeKaser surveys are less optimistic than they were | | | | fare much worse. |
| even a few months ago. Separately, one leading | | | | Molony points out that the most severe drops in |
| builder, Pennsylvania-based Toll Brothers, announced | | | | real-estate prices are usually triggered by an underlying |
| last week that expected demand for 2006 would be | | | | economic crisis. After oil prices went into a six-year |
| down, resulting in moderating price increases and | | | | decline in the late 1970s, housing prices in oil cities |
| fewer sales. New-home sales declining DeKaser also | | | | experienced steep drops. In Oklahoma City, prices |
| notes that the number of new homes sold have fallen | | | | plummeted 26 percent in real dollars from 1983 to 1988. |
| sharply since peaking in July at an annual rate of 1.3 | | | | With inflation, the "real" loss was more than 40 percent. |
| million units. DeKaser calls new-home sales (rather than | | | | Houses in many oil patch cities are worth less in real |
| existing-home sales) the canary in the coal mine. | | | | dollars than they cost more than 20 years ago.Written |
| "Developers tend to be more sensitive to market | | | | for |
| conditions," he said. They have cash flow issues, | | | | By James Christensen |
| payrolls, and loans that put more pressure on them to | | | | Real Estate Expert and educator. Our training site |
| sell. Ordinary home sellers are often more selective | | | | offers a valuable service to individuals looking to get |
| than developers, even taking properties off the market | | | | into the Real Estate industry. |