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Tuesday, November 29, 2005

Housing Bust Waits A Bit Longer and Longer and Longer

Experts have predicted the housing boom will turn into a bust now that interest rates have increased. The NYT headline today is Home Sales Fall 2.7%, Suggesting a Drag on '06 Economy. Of course, October numbers say something different.

It is reported in Breitbart.com (their headline stated:New Home Sales Hit Record Level in Oct.):

The Commerce Department said that sales of new single-family homes shot up by 13 percent last month, the biggest one-month gain in more than 12 years. The increase pushed sales to an all-time high seasonally adjusted annual rate of 1.42 million units...

Sales were up in most regions of the country, led by a 46.9 percent surge in the West and a 43.3 percent jump in the Northeast. Sales also rose by 1.9 percent in the South but were down 9.5 percent in the Midwest.

The nationwide jump in new home sales was the one bright spot for housing last month. Sales of previously owned homes fell by 2.7 percent, the National Association of Realtors reported on Monday, and construction of new homes and apartments also fell during the month.


Could the decrease in previously owned homes be because people have been buying the new ones?

The NYT had this comment from Patrick Newport, an economist at the research firm Global Insight:

"The evidence is consistent with a slowing housing market but one that is still very strong".

Slow but strong?

With the average interest rate on 30-year mortgages at 6.28 percent, the housing continues to be quite affordable. Economists and real estate experts are properly pessimistic about this facet of the economy as they have been over the last 4 years in other areas of the economy. So the boom should continue. They remind me of Kramer in "The Contest" episode: "Starting Now!!!"

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