|
| More rates and news from Mixed Housing Market News
(Reading all the daily Internet and news articles can become very confusing.)
You think the housing market is going one way but it is really going the other, only to find out a day later that it was going the direction you originally thought. Or was it?
What does the housing economy want? If it wants the market to bounce back to where it once was or to at least become comparable, then any activity in sales should be appreciated.
Consumers complain that housing is unaffordable and therefore will not buy, but economists scoff when prices fall. They see this as the market further deteriorating. Then how will you generate more sales if the consumer cannot afford to buy?
The article, “Quarterly Home Prices Grow at Slowest Pace in 8 Years,” written November 30, 2006 by Kathleen Howley and published on Bloomberg.com, explains how it depends what you want to determine if lower prices is a positive or negative sign for the housing market’s future.
“Prices for single-family homes raised an average of 0.86 percent during the three months, the slowest rate since 0.79 percent in the second quarter of 1998, the Office of Federal Housing Enterprise, known as Ofheo, said today in Washington.”
“Dropping mortgage rates have fueled hopes the housing market may rebound after unsold properties rose to a record in July. The report shows that most of the nation is still in the midst of a slowdown, Ofheo Director James Lockhart said in the report.”
It should not be news that the U.S. housing market is in a slowdown but rather a known fact. And as consumers display that the market already is unaffordable, how will they be able to buy houses if prices increase? Even if mortgage rates dropped to an impossible 3.0 percent, if the housing price is too high or even rises, the average consumer cannot buy.
That’s like saying that if you take a $10 hamburger that usually has 7.5 percent tax, and raise the price to $15 but lower the tax to 5.5 percent, more people will buy the burger.
This is not to say that lower interest rates will not help.
“The average rate for a 30-year fixed mortgage this week is 6.14 percent, the lowest since January, according to Freddie Mac, the No. 2 mortgage buyer. A year ago, the rate was 6.26 percent.”
In fact, sales have slowly leveled out and actually increased in the past couple months after a year of 20 to 30 percent declines.
“Sales of previously owned homes, which represent 85 percent of the market, gained 0.5 percent to an annualized pace of 6.24 million in October, the National Association of Realtors said this week.”
Prices have fallen but there is no way the economy could continue to sustain double digit percentage price increases every year.
“The median price of a previously owned home fell 3.5 percent in October to $221,000 from a year earlier, the biggest year-over- year decline on record, NAR said. The number of unsold homes was 3.85 million, the second-highest on record, following July's all- time high of 3.86 million.”
If you are a buyer, this is finally great news. If you are a seller, yes you have to take a price cut but at least you have a shot at a sale now compared to a few months ago. And if you are an investor that is waiting for property values to increase again; relax, it will, it always does.
|
