Housing Market Update
This week, alot of media attention centered around New and Existing Housing sales numbers, and the "healthy" housing market. The media up beat this drum to death, by concluding that the housing market reflected the overall economy.
God, I hope the economy does NOT resemble the housing market, if it does, as Sheriff J.W. Pepper used to say, "Boy, you in a heap a trouble".
Item 1) Rental property is usually valued using the cap rate, the property's annual operating income divided by its price.
With rising prices, cap rates have plummeted, at the same time the SFR boom has put a dent in rents.
The recent Census Bureau report shows the effects as rental vacancies stand near all-time highs at 10.1%. An unhealthy rental market is not a good economic sign.
Item 2) The California Association of Realtors Unsold Inventory Index for existing, single-family detached homes in March 2005 was 2.7 months, compared with 1.3 months for the same period a year ago.
Last time I checked 2.7 divided by 1.3 equals around TWO. A doubling of unsold existing inventory in one year, another sign of a less than healthy market. We saved the best for last...
Item 3) Earlier this week we noted in the Daily Market Soapbox that in March sales of new homes rose 12% to a record high.
What was un-noticed by many, in March the median price of new home sales actually declined to $212,300, a 9.3% drop from the February level of $234,000.
The economy is good, rates are still low, the realtors and media say all is well. Not in one year, but in one month, a national 9.3% drop in actual median sales price.
I am being very conservative in my view that the housing bubble will suffer a slow and painful deflation @ 10% per year over 4 years, and the band played on....
Thanks to Ben Jones @ The Housing Bubble for the following:
Rental Vacancies
Unsold Index Doubles
Upside Down In One Month
God, I hope the economy does NOT resemble the housing market, if it does, as Sheriff J.W. Pepper used to say, "Boy, you in a heap a trouble".
Item 1) Rental property is usually valued using the cap rate, the property's annual operating income divided by its price.
With rising prices, cap rates have plummeted, at the same time the SFR boom has put a dent in rents.
The recent Census Bureau report shows the effects as rental vacancies stand near all-time highs at 10.1%. An unhealthy rental market is not a good economic sign.
Item 2) The California Association of Realtors Unsold Inventory Index for existing, single-family detached homes in March 2005 was 2.7 months, compared with 1.3 months for the same period a year ago.
Last time I checked 2.7 divided by 1.3 equals around TWO. A doubling of unsold existing inventory in one year, another sign of a less than healthy market. We saved the best for last...
Item 3) Earlier this week we noted in the Daily Market Soapbox that in March sales of new homes rose 12% to a record high.
What was un-noticed by many, in March the median price of new home sales actually declined to $212,300, a 9.3% drop from the February level of $234,000.
The economy is good, rates are still low, the realtors and media say all is well. Not in one year, but in one month, a national 9.3% drop in actual median sales price.
I am being very conservative in my view that the housing bubble will suffer a slow and painful deflation @ 10% per year over 4 years, and the band played on....
Thanks to Ben Jones @ The Housing Bubble for the following:
Rental Vacancies
Unsold Index Doubles
Upside Down In One Month
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