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October 04, 2005

Will price corrections revive slumping market?

Nytimes_pg1_100405_3After a series of front page stories on the real estate bubble in the Boston Globe this year, their parent company, The New York Times, put this headline on page one today: "Slowing Is Seen in Housing Prices in Hot Markets."  Citing statistics about slowing sales, rising inventories, and flattening prices in Boston and elsewhere...

The question remains whether all of this represents a momentary cooling off of some overheated housing markets, or it presages a more pronounced downturn that would end a decade-long boom.

Some economists and commentators have for years predicted the bursting of a real estate bubble, and previous slowdowns have turned out to be relatively brief pauses before prices started accelerating again.

But with mortgage rates now rising, the cost of gasoline hovering at or near $3 a gallon and house prices in some areas out of reach for many families, brokers and analysts said they thought that this slowdown could be the real thing.

Yesterday's blog post foretold one of the reasons for the slowdown:  "sellers still expect to reap double-digit price appreciation each year."  Leading listings agents quoted by the Times say overpricing is causing the market down to slow down, but that's not even on the short list of factors economists at the National Association of Realtors are watching to identify markets headed for a bust.  While we've been tracking expired listings as a leading indicator, and others in Massachusetts are watching record high inventory levels, one of the most comprehensive list of factors we've seen on why the housing market is headed for a correction or crash is coming out of San Francisco. 

What's your take?  If sellers adjust their price expectations, will the market take off again or more serious fundamentals leading to a housing recession?  Post your comments or call 617-876-2117 to record a 1 to 3 minute sound bite (which we may use in a future podcast).

11:15 AM in Behavioral factors, Downward pressures, Falling prices, In the News, Market Trends, Sales falling | Permalink


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