Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Wednesday, September 07, 2005

The Deflation of the Housing Bubble

Housing prices fell in July: [h/t to Sean]

The Wall Street Journal missed it ... and so did almost every major media outlet. When the new statistics on new home starts and pricing came out last week, the good news was overwhelming. Housing sales were up 6.5% "to break yet another record," reported WSJ.

So what did everybody miss? Namely, one small detail that tells more about the housing market than most statistics ... and very possibly is the first crack in this enormous real estate bubble.

Get this:
The median price of a home fell in July by a whopping 7.2%.
And the details paint an even more alarming picture of the staggering decline in the U.S. housing market. Since April, median home prices have fallen 14% ... They fell from $236,300 in April to $203,800.
Of course some regional housing markets have been thrown further out of whack by Katrina. Many homes were destroyed or rendered uninhabitable. Elsewhere, homes that had been on the market for months have been snapped up at listed prices (or more) in some places. And the demand for rental units is sky-high in the areas that have taken in many refugees.

So while the housing bubble may be deflating overall in the US, and may continue to deflate in the especially inflated markets on the east and west coasts, in other areas the deflation of the bubble will not likely be severe, if it happens at all.

How many real estate speculators in the south bought places on Monday afternoon, after news of the levee breaks, hoping to flip them within a couple of weeks? Would doing so somehow be immoral? Would selling a house at a price above the August 27th listed price be "price gouging"? Or is there an implication in anti-price-gouging advocacy that people who can afford to buy a house don't need protection from the evil, nasty price-gouging real estate speculators?
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