_Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s)._

[Click here for full graphic [NYT]](http://www.nytimes.com/imagepages/2006/08/24/business/20060824_ECON_GRAPHIC.html)

Well, sort of.

One of the long used investment arguments for the housing market has been the idea that housing prices have never declined in the modern era. This shouldn’t (but it does) suggest that prices don’t decline. Its a play on statistics.

This month, three of four national regions saw a drop in median sales prices and all regions saw sharp drops in the number of sales. This is _still_ is a play on statistics since I would guess that housing prices in many of the three regions (all but the South) are not falling, but rather, the mix of units has changed. This is not to say they won’t, but I don’t get the impression that sales prices (not list prices) are actually falling on most actual transactions based on current media coverage.

Its also interesting that national inventory absorption now takes 7.3 months versus 4.6 months a year ago.

Perception-wise, its going to get interesting if the South stops holding everyone else up. Market psychology/mob mentality is a fragile thing.


One Comment

  1. Jonathan August 25, 2006 at 9:18 am

    Real estate, like any market, can get ahead of itself. If you suppose, for a moment, that the long term average price appreciation of housing is 5% (probably on a “real” basis, but I suppose that is subject to debate), then periods of above 5% appreciation will eventually average out with periods of sub-5% appreciation. I think we all know which period we are in now. The problem is when the market is in “10%+ p.a. appreciation land”, it looks like it will go on forever. When it is correcting, it looks like the sky is falling. (For a good example of “the sky is falling” see . Some speculators in markets that are illiquid (and housing certainly is) will get burned and forced out — which is a healthy thing in the long term. I like to think that there are fewer speculators in general in NYC than there are, say, in Las Vegas or South Florida, but I don’t know for sure. What matters is how many speculators can’t stand the heat.

    The strong rental market leans against the falling prices. Rental apartments in NYC are up 15% since the start of the summer. But the cash flow still isn’t good enough to buy & rent out and make some return on your cash. You will need capital gains to bail you out. When the market squeezes out those capital gains expectations (which it is doing a good job of now, but they are not all gone), that is when you know it is time to buy. Will it ever get there? It did in the mid-1990s correction. It could again.

    The whole “bubble” thing is probably a misnomer. Bubbles burst and are gone. Housing is a basic good and, unlike tulips, have underlying demand. Remember that in 2000, when people got burned in the internet stocks, money started to flow into housing as an alternative place for your cash. This was exacerbated after 9/11. If the cash isn’t going into housing now, where will it go? Probably financial assets….

Comments are closed.