KB Homes: U.S. Home Prices Will Drop 10% More

Eli Broad, founder of homebuilder KB Home

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U.S. home prices likely will drop another 10 percent from their peak before the housing market begins to recover, said Eli Broad, founder of Los Angeles-based homebuilder KB Home. "Every housing market’s different, but you can expect housing prices to continue to decline in most markets for the next year or so,” Broad said in an interview from Los Angeles with Bloomberg Television.

Sales of previously owned homes in the U.S. fell 1 percent last month and the supply of unsold properties reached a record, the National Association of Realtors said last week, signaling a continuation of the 27-month housing slump. The median price of an existing home fell to $202,300 from $219,900 in April 2007. "I think we’ve got probably another 10 percent to go” from the price peak reached in 2006, Broad said today.

Broad said the U.S. economy is "in a recession no matter how you want to measure it,” and recommended that investors put their money in the energy industry, multinational companies with the largest stock-market capitalizations, and emerging economies such as Brazil, Russia, India and China. The return on U.S. stocks likely will "be in low single digits” this year, he said.

KB Home Founder Broad Says U.S. Home Prices Will Drop 10% More
Matt Miller and Daniel Taub
Bloomberg, May 28  2008

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  1. Olav commented on May 30

    The key words are 10% “from their peak”. So if a house was at one point worth $400,000 and its value has dropped to $300,00, they are expecting it to drop another $40,000, which would be a 13.33% drop in value from its current level.

  2. Alaskan Pete commented on May 30

    Barry, are you really personally posting things at 3:30am?

    Get you some sleep, my man. Maybe wind down with Grant Green Idle Moments, or some of the slower tempo pieces from Grant Green complete quartets w/Sonny Clark package…that sweet, sweet early/mid 60s Blue Note stable was awesome.

  3. Tennis227 commented on May 30

    Prices should drop differently in different locations. Las Vegas was predicted to drop another 18.3% this year. I guess KB founder is right, home prices on average will drop 10-14% more before the market stablizes. New home prices are very competitive with older homes and even cheaper than older homes so older homes must drop from this point on. Banks are still holding firm on their selling prices but eventually they will sell lower to get rid of their inventory.

  4. Steve C commented on May 30

    Broad: “and recommended that investors put their money in the energy industry”

    I’m not sure I’d agree with Mr. Broad on this one, especially in the short run. The dollar is strengthening, oil prices are falling, futures market investigating oil trades,… I’m waiting a while for this market to shake out some before I reinvest in this sector.

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