In May, I reported that I saw no signs of a crashing real estate market in either Colorado’s front range or Southern California. It was taking a bit longer to sell homes than it did a couple of years ago, but prices were nowhere near what I’d call “bargain basement,” and not even cheap in many cases.
I am but one person, though, and my findings in specific areas of just two states are not expansive enough to command authority when considering the national situation. To get closer to that, I asked Kelly Letter subscribers to send me information from their neck of the woods. As ever, loyal readers came through for me and I’m delighted to pass along their observations.
Chris Kolb lives in a development in Western New Jersey near the Pennsylvania border. Most of the homes there are fairly large with four bedrooms and at least two baths. The age of the homes ranges from five to 10 years and their lots from half an acre to 1.5 acres.
Chris wrote, “I had mine built in 2000 and within the delivery time the base price of the homes went up $20,000 already, without me even having moved in yet. It never stopped appreciating since.”
In the past six months, however, he’s noticed a lot of houses up for sale. What’s more, the “asking prices have somewhat dropped since last year and I believe they will drop quite a bit more before rebounding.”
Chris has a neighbor who recently put his house on the market but says he’s in no hurry to sell. That’s good because the neighborhood is already overflowing with homes for sale.
A quick glance at my own notes from phone calls to brokers in Estes Park, Colorado showed that the number of homes up for sale is higher than it’s been in the past five years, and that their time on the market is longer.
Meanwhile, Wesley Williams is finding the same abundance of FOR SALE signs near where he lives half an hour north of New Orleans, but also the same relatively unchanged sale prices.
Word on the street down there is that prices are down 6%, but Wesley hasn’t been able to confirm it. “I can probably get lower prices by making an offer, since property is sitting for so long,” he surmises, “but sellers are not lowering prices of their own initiative.”
Tell that to Jeremy Diamond over at Annaly Capital Management. In his June 4 report, Home Prices: The Underappreciated Economic Indicator, he wrote, “Home prices nationally…are going down. Not since the Great Depression have home prices in the U.S. declined on a national basis. No matter how you measure it or which index you prefer to follow, prices are struggling: In the latest reporting period, year-over-year median new- and existing-home sale prices are down 10.9% and 0.8%, respectively…[Even] the trade group representing real-estate agents is forecasting falling prices.”
The problem is, that forecast has been in place for almost two years now, and a year-over-year drop of 10.9% in an asset class that has done as well as homes have done is nothing. Besides, that’s for new homes. Existing home prices declined a puny 0.8%. If that fly speck of a drop sounds trumpets of alarm, what is sounded for a 30% decline?
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