Tuesday, May 09, 2006

Softly, softly...

The housing market is broadly softening, although a few areas are resisting the trend (Seattle and Salt Lake are two of those areas, as is Dallas.). The real problem is that the speculators are starting to dump the properties they own and are not buying, in some cases walking away from existing purchase contracts. This indicates the margin has been squeezed out, and anyone buying in now had better be buying because they want to own real estate, not because they want to flip it.

Want hard numbers? The National Association of Realtors is expecting that existing home sales will decrease 4.7% this year, and new home sales will decrease 8.5%. Prices are expected to increase half as fast as last year. Accounting tricks can no longer keep mortgage rates down. Even Toll Brothers, builders for the rich and famous, is showing declines (Their net income was up 49% in the first quarter, but orders dropped 29%.).

This is not a market falling off a cliff, but the problem with a speculative market (and let's face it boys and girls, this is a speculative market) is that once the dominos start falling, they keep falling.

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