Is the Real Estate Bubble Deflated?
To hear the news media talk the death of the real estate bull market is a foregone conclusion. There is, after all, a near unanimity among news publications of all stripes - including those known as being permanently bullish on stocks and real estate - that the real estate bubble is in the process of deflating with no hope of a comeback in the foreseeable future.
Everywhere one turns, it seems, one can't help hearing about the demise of the real estate bubble. This topic of discussion has made quite a resurgence in recent weeks as evidenced by the number of times the term "housing slowdown" has been mentioned in recent Internet blog posts or chat boards.
For instance, CNNMoney.com recently published an article entitled "Deflating the real estate bubble." It said, "Forget all those predictions about a soft landing…" From there we're told the real estate deflation isn't over yet and we could be in for a long winter, so to speak.
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Value Homes Involves Examining Wider Data
In cooling real estate markets, it's the hottest question: How do you value a piece of property when local home sales are down 20 percent to 40 percent from last year, inventories of unsold homes have ballooned by 200 percent or more, and all the trend lines are pointing negative?
It can be tough. Traditionally, real estate appraisers focused heavily on sales of similar properties — "comparables'' that closed in recent months — to make their valuations. But that doesn't work well in markets that had been superheated — prices rising at 1 percent to 2 percent a month — but are now stalled out or falling.
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Housing Markets Becoming Overvalued
Despite a cool-off in home prices, more markets are overpriced than ever, according to a new survey.
Higher interest rates, especially for adjustable rate mortgages, helped push some housing markets into the overpriced category last quarter, according to Jeannine Cataldi, an economist with Global Insight, which conducted the analysis with National City.
Though rates have declined since the end of the second quarter, the 30-year fixed rate is still at 6.4 percent versus 5.8 percent a year ago. The difference for ARMs is even bigger.
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U.S. Housing Tumbling To Three-Year Low
New home construction in the United States declined again in August to its lowest level in more than three years, the latest sign that the housing market is in the grip of a severe slowdown.
According to the Commerce Department, U.S. housing starts fell 6 per cent in August to a seasonally-adjusted annual rate of 1.665 million, the lowest since April 2003. Economists had expected starts to fall to an annual rate of 1.75-million units.
In addition, July starts were revised down to 1.772-million units from an original estimate of 1.795 million units.
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Rising Inventory Putting Pressure on Prices
A continued rise in inventories of unsold homes in August signals further downward pressure on home prices in many parts of the U.S.
Inventories of homes in 18 large metropolitan areas expanded by 3.5% in August, according to data compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data are based on single-family homes and condos included in local multiple-listing services of homes for sale.
The biggest increases included 8% in Orlando, 6.4% in Seattle, 6.1% in San Francisco and 5.6% in Miami.
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