Wednesday, December 26, 2007

Pace of Decline In Home Prices Sets a Record

One more reason to rent right now:

A closely watched gauge of U.S. home prices shows they are falling sharply across most of the nation, as a deepening slump in the housing market threatens to damp consumer spending.

The silver lining behind the latest home-price data is that they signal the market is making what most economists see as a necessary adjustment, dragging home prices back into closer alignment with Americans' ability to pay. The market is working its way "back to reality," says David Seiders, chief economist of the National Association of Home Builders. He thinks house prices will bottom out by early 2009.

Some other economists say that might not happen before 2010. "The housing shock is only about halfway over, and housing prices will continue to fall well into 2009," says Lehman Brothers economist Michelle Meyer.

(HT Greg Mankiw)


Ali Hasanain said...

Wait, isn't that a reason to buy?

Or are you from the buy high sell low school of "thought"? =P

thinking said...

I agree with Ali: It is precisely the time to buy when prices decline. To assume the opposite is to make the same mistake people often do with the stock market. The people who make money are those with the cash who will scoop up on the bargains. As the immortal song by the Talking Heads goes: "same as it ever was."

Brian Hollar said...

Depends on whether or not you think the decline is going to continue. My guess is there is still more of an adjustment coming in many housing markets.