Friday, September 24, 2004

The UK housing market finally began to cool down in August when monthly housing prices fell for the first time in two years. The data show that the US housing market was still rip-roaring ahead in the second quarter, but the turnaround in prices may finally be upon us.
The pace of home sales slowed down in August, according to an industry report Friday, as the latest reading on the market came in weaker than Wall Street forecasts.

The National Association of Realtors report showed existing home sales at a 6.54 million annual pace in the month, down from the 6.72 million annual sales pace in July. Economists surveyed by forecast that the sales would fall to a 6.65 million annual pace in the most recent period.

The group said that while the sales have slowed, they are still near historically high levels.

"Since April we've experienced three out of the four strongest months on record for existing-home sales, and August was the sixth highest," said David Lereah, NAR's chief economist, in a statement. "We're at a more sustainable level now, but long-term there should be some additional easing toward the end of the year. In fact, the August sales pace is close to what we project for total sales this year."
Lereah isn't being honest about his own report. On the question of sustainability, August home sales (SA) fell most in the Midwest (-4.3%), the least frothy region of the country. Sales in the newly re-bubbling Northeast didn't fall at all, and in the completely out-of-control West they were only -1.6%.

A telling statistic, however, is the fall in home prices at the regional level in August. In the Northeast the median price changed -0.8%; in the South, -0.3%; in the West, a big -2.4%! Since June, median prices in the South (which of course includes Florida) are -2.1%.

Now of course, one month does not a trend make, and the regional data obscures what is going on in particular metropolitan regions (which is the most relevant scale for housing prices), but we do have a most interesting picture in three of the four regions of the country where demand is falling at the same time that prices are falling. The Australian housing bubble seems to have stopped inflating when first-time buyers were completely squeezed out of the market. Only time will tell if this is the beginning of the end for the US bubble as well.


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