Saturday, July 22, 2006
WSJ: Housing Price Squeeze In Majority Of Metro Areas
A quarterly survey conducted by The Wall Street Journal reveals that nearly three quarters of the nation's 26 major metro areas are lowering real estate prices as inventories mount. The survey adds to the evidence that the U.S. housing market is facing a severe downturn, if not a recession.
In 23 out of 26 metro areas surveyed by the Journal, the inventory of homes for sale is growing. And in some cases it's skyrocketing. In Orlando, FL, the number of homes for sale is five times higher than it was a year ago. In Phoenix, AZ and Tampa, FL, inventory has quadrupled. Washington, D.C. has seen its inventory triple in the past year.
So it's no wonder that sellers are slashing prices. In 19 out of 26 metro areas, the price of homes is trending down. It's even happening in some areas where jobs are plentiful, traditionally a sign of a healthy market. Phoenix, Orlando, and Las Vegas, Nev. all have very strong employment outlooks according to the survey, but falling prices.
The National Association of Realtors expects home sales to fall 6.7 percent from the 2005 peak. Richard Smith, vice chairman and president of Cendant spin-off Realogy Corp. says that even with the decline in sales, 2006 "will be the third best year in the history of the business."
However, Scott Anderson, senior economist at Wells Fargo, disagrees. Anderson says that falling prices may prompt sellers to "get out with what they can," says the Journal.
William Wheaton, a housing economist at the Massachusetts Institute of Technology, tells the Journal "formerly hot local markets may be heading into five or 10 years of flat to slightly higher home prices" because of the trend of baby boomers selling expensive homes in favor of cheaper areas.
Wheaton also names other factors that could damage the housing market even more, such as investors and second-home owners dumping properties and loan defaults on properties.