Yesterday’s Housing data is producing some pretty ugly headlines today; If the market chose to ignore the data, let me remind you that this is the last week of the quarter, so anything can (and will) happen.
Here’s how its being played in the WSJ:
"Yesterday’s report also confirmed home prices are
coming under pressure. The median sales price of an existing home was
$225,000 in August, down 1.7% from a year earlier. That was the first
year-to-year price decline since 1995 and the second sharpest in the
nearly 40 years the data have been collected.
Prices fell faster for condominiums than for
single-family homes. In August, the national median price of a
single-family home fell 1.7% from a year ago to $225,700. The median
price of an existing condominium fell 2.4% from a year earlier to
$223,200. . .
Falling prices have a flip side. If their homes are worth less,
consumers may feel less wealthy and therefore spend less on goods and
services, a worrisome trend for the broader economy. "We have to
acknowledge that this is a clear risk to the consumer," said Haseeb
Ahmed, U.S. economist at J.P. Morgan Chase & Co. In the short term,
he said the recent drop in gasoline prices should offset the effect of
declining home values."
The Chicago Tribune observed:
"At a pace that some analysts described as "astonishing," the price of existing homes declined nationally for the first time in 11 years in August, signaling that the long-awaited other shoe has finally dropped on the real estate market.
Home sales have been slowing for months but sellers appeared to be holding out to get their price. Now the pressure to sell is intensifying, leading to a drop in house values across the country."
The issue that has Economists worrying is the "housing slump’s ripple effects. Even as the boom began to wind down last year the housing market probably contributed about $2 trillion to the U.S. economy, according to the National Association of Realtors. One estimate from Goldman Sachs predicts that the slowdown will cut 1.5 percentage points from the nation’s economic growth in 2007."
Two other comments via the Trib:
"It’s pretty amazing how fast the reversal has occurred since last year," said David Stiff, chief economist at Fiserv CSW, a property-data analysis firm in Boston.
"There has never been such a quick deceleration in price appreciation," Stiff said. "I was looking at data from 1969 forward, and it’s unprecedented."
Bloomberg noted that "Home construction in the second quarter subtracted more from economic
growth than at any time since the first three months of 1991, the
Commerce Department said."
But the key issue remains the impact on consumner spending. Joseph Stiglitz had the money quote on this:
"What worries me is how long we can sustain consumption on the basis of what we have sustained it in the last several years: by taking money out of your house,” Joseph Stiglitz, Columbia University economics and Nobel laureate, said in an interview Sept. 22."
Here’s yet another chart of price changes, along with regional prices:
UPDATE Septmber 26, 2006 5:05PM
Here are a few more lovely headlines:
Mass. home prices fall 6.1% as downturn gathers speed
Boston Globe, September 26, 2006
Home prices likely to fall more
USA TODAY, September 26, 2006
Existing Homes’ Median Price Falls Decline Is First Since 1995
As Sales Continue to Slump; Risk to Broader Economy
WSJ, September 26, 2006; Page A2
U.S. Existing Home Sales Fall 0.5% in August; Sales Price Drops
Shobhana Chandra and Joe Richter
Bloomberg, September 25, 2006 10:00 EDT
Home prices finally hit wall
Decrease is 1st in 11 years; Chicago avoids drop—for now
Chicago Tribune, September 25, 2006, 10:43 PM CDT