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