New-home sales tumble in November
Drop is further evidence that sizzling market starting to cool

MSNBC staff and news service reports
Updated: 12:12 p.m. ET Dec. 23, 2005

WASHINGTON - The Commerce Department unveiled fresh data Friday suggesting the sizzling housing market is indeed cooling off.

Sales of new homes plunged in November by the largest amount in nearly 12 years, providing the most dramatic evidence yet that the red hot housing market over the last five years is losing steam.

New single-family homes were sold at a seasonally adjusted annual rate of 1.245 million units last month, a drop of 11.3 percent from October, when sales had surged to an all-time high.

“This is consistent with our view that the housing market is likely to continue to moderate in the coming months. But ... home sales are historically pretty strong,” said Patrick Fearon, senior economist at A. G. Edwards and Sons in St. Louis.

Last month’s decline was even bigger than the 8.7 percent drop-off that Wall Street analysts had been expecting. While sales of both new and existing homes are still on track to set records for a fifth straight year in 2005, analysts are forecasting sales will decline in 2006 as the housing boom quiets down.

Sales of existing homes dropped nearly 3 percent for the month of October, the National Association of Realtors reported late last month. That decline pushed the number of unsold homes to 2.87 million, the highest level in more than 19 years.

Sales of existing homes outpace those of new homes by a rate of nearly 6 to 1.

“The data must be considered confirmation of a clear slowing in the housing sector,” said Alan Ruskin, research director at 4CAST Ltd.

The housing market has had a charmed run in recent years, buoyed by a sustained period of low home mortgage rates.

During that time housing and related industries — from mortgage banking to hardwood floor sales — has been the engine for U.S. economic growth, consumer spending and job creation.

Now, rising interest rates are pinching many potential buyers by pushing monthly mortgage repayments higher. Affordability for first-time buyers has fallen to 20-year lows.

“The real estate market has been an underlying source of support for private consumption. As that market begins to slow and weaken, that would have an impact on private consumption,” said Brian Dolan, director of FX Research at Gain Capital in New Jersey.

Analysts are looking for home sales to dip by around 6 percent next year under the impact of rising mortgage rates. Analysts believe that house prices, which had been soaring at double digit rates, will moderate as well.

Some of that price moderation was evidenced in the November new-home sales report, which showed that the median price of a new home sold was $225,200 last month. That was up just 0.3 percent from November 2004, the weakest year-over-year price change in two years. The November median price was down 4.1 percent from the October median sales price of $234,800.

Some economists are worried that housing prices in some areas have been driven higher by a speculative frenzy that could see prices plunging as sales slow in the hottest markets. That scenario would evoke memories of the sharp declines that occurred when the stock market bubble burst in early 2000.

But other economists contend that housing is unlikely to exhibit the same collapse that the stock market did although they believe that the declines in sales expected next year will act as a drag on the overall economy.

By area of the country, sales were actually up by 13.4 percent in the Northeast, the biggest percentage increase in this region since January 1994.

However, sales fell in all other areas, led by a 22.1 percent drop in the West, the biggest decline in this region since February 1995. Sales were down 18.3 percent in the Midwest and fell 5.5 percent in the South.
The Associated Press and Reuters contributed to this report.

© 2005 MSNBC.com

URL: http://www.msnbc.msn.com/id/10585961/

Yea damn rising interest rates!.

Good article...
That scenario would evoke memories of the sharp declines that occurred when the stock market bubble burst in early 2000"Evoke memories". If that were the Herald it would suggest that a drop in housing sales would send people to the soup kitchen like the stock bubble of 2000.

One important thing to remember is that Real Estate is very local. When the nation was slumping, Miami was still booming. And yes, median real estate prices were up 19% when the interest rates were at 8%.

Here is the west coast version. After reading both articles, I see no reason to panic. Sounds like good news to me.


From the Los Angeles Times
SoCal Home Sales Flat, Though Prices Rise
By Bill Sing
Times Staff Writer

2:03 PM PST, December 15, 2005

Southern California's housing boom continued to run in cruise control in November, with the median home price up 15.4% over the year-ago level and 1.3% over the previous month, according to data released today.

Strong buyer demand and the anticipation of higher mortgage rates sparked a rise in the median price to a new record of $479,000 for the six-county region, said DataQuick Information Systems, a La Jolla-based real estate research service. The percentage gain matched the 15.4% year-over-year rise in October, when the median price stood at $473,000.

Sales of new and resale homes totaled 27,637, down 3% from October, but up 0.6% from the year-ago month. A sales decline from October to November is normal for the season, DataQuick said.

The latest data provides more evidence that the area's 5-year-old housing boom, while no longer white-hot like a year or two ago, has settled into a more moderate pace. While homes are staying on the market longer — with sellers in some cases cutting asking prices — there is enough pent-up demand in the market to keep prices from rolling over, analysts said.

"I don't see any signs of weakening. The market just isn't frenzied anymore," said John Karevoll, DataQuick's chief analyst.

Even San Diego County, once the region's hottest market, has stayed afloat. Its 6.4% year-over-year gain in its median price in November was the region's weakest, but the county has maintained percentage increases in the mid-single-digit levels since May.

Many analysts see San Diego County as a harbinger of whether the state's housing market can achieve a "soft landing" instead of a freefall.

For the region as a whole, year-over-year increases in the median price have settled into a range of between 14% and 17%. That is still better than many analysts had expected, although off the robust gains of at least 20% between January 2004 and February 2005.

The question is how long the current pace of price increases can be sustained. Several analysts predicted the market would slow to single-digit price gains next year. But few are willing to forecast outright declines any time soon — a testament to the market's resilience, which continues to defy doomsayers who contend that housing prices are in a bubble that is bound to burst.

The state and national economies would have to slow significantly — with resultant job losses — to generate price declines like those seen in the early 1990s, many analysts say.

All of the region's six counties saw median price increases on a year-over-year basis, led by San Bernardino County, with a 23.2% gain to $350,000 on a 1.8% drop in sales versus the year-ago month, according to DataQuick.

The median price is the level at which half the homes sold for more, half for less.

Two of the six counties showed year-over-year gains in sales volume, led by Riverside County with an 18.6% gain. Its median price rose 17.1% to $405,000. Ventura County posted a sales gain of 12.1%, as its median price rose 20.7% to $612,000.

Orange County continued to boast the region's highest median price at $616,000, a 13.9% gain on a 1.6% decline in sales. Los Angeles County's median price rose 19.5% to $497,000 on a 3.6% decline in sales. San Diego's 6.4% rise put its median price at $518,000 on a 9.5% decline in sales.

I stand corrected. The Herald couldn't turn the local news doomy and gloomy. Sorry to have doubted you Haggman!
--------------------------------------------------------------------------http://www.miami.com/mld/miamiherald/13479345.htm?template=contentModules/printstory.jsp

Posted on Sat, Dec. 24, 2005

S. Florida home costs roar back
The cost of South Florida single-family homes soared in November after an October slide, bolstering claims that hurricanes caused the dip.
By MATTHEW HAGGMAN
mhaggman@MiamiHerald.com

South Florida home prices jumped sharply in November, appearing to quell speculation the red-hot housing market is cooling off.

The median price of an existing single-family home climbed 6 percent from October to November to $391,100 in Broward and 4 percent to $381,600 in Miami-Dade, according to the Florida Association of Realtors.

The price gains come after October median homes prices in South Florida had dropped to $368,900 in Broward and $366,300 in Miami-Dade. Prices in Broward had fallen for two consecutive months before November.

Those slumps -- coupled with the relentless increases in interest rates and the fact mortgage rates have creeped higher -- have sparked concern the long-predicted slowdown of the torrid housing market was finally here.

But others attributed the October dip to disruptions from hurricanes -- particularly Wilma -- which battered South Florida and closed businesses for days.

I think South Florida real estate is really overinflated. Google may continue to go up and up but I won't buy it trading at $400 a share no matter how much stupid people will pay for it. I don't buy growth stocks. I buy value stocks. I feel the same way about real estate.

I think the best place to buy right now is in North Central Florida and the North Florida coast. Ocala. Gainesville. St. Augustine. Palm Coast.

South Floridians who see they can now sell their homes they bought 20 years ago for $75,000 for maybe $500,000 will start selling in droves and cashing out for greener pastures. It's already started and as prices go up, people will start cashing out more and more.

All it'll take is another hurricane or two. 50% insurance rate hikes piss people off. Historically, North Central Florida and the North Florida coast receives the fewest hurricane hits of anywhere in the state and also the lowest insurance rates.

This is the most undervalued part of the state. Watch it boom in the next ten years.

Nice to see someone agrees with me. I have seen this on the west coast. Those with property will sell and move to places where they can afford a larger home (California syndrom) and why shouldnt they. If I could sell a small home in Miami for $500,000 and move north and buy a big house with everything I need for $200,000 and have a lot of cash left afterwards I would do it. It probably will become a retirement package for some. In any case it will mean more turnover in Miami's population.

I think that Miami real estate is not overinflated, and I'm putting my money where my mouth is.
I've worked on rea estate deals in the North and Central Florida (562 acres in St. Augstine) but still think that the quality of life in Miami is better and one of the best in the world.
For some people, quality of life means 5 bedrooms with a yard and room to accumulate plasma tv's, Tivo's, and things with the money they save on housing. For other people, spending a few more hundred a month on a tax deductible mortgage for a two bedroom condo in walking distance from Lincoln Road the Atlantic Ocean and no plasma TV is quality. In Miami, as opposed to most smaller towns, the density insures that you have community amenities like sports teams (Miami has all major sports teams), cultural events (Largest art show in the world, Art Basel, largest boat show in the world, International Boat show, NASCAR, Dale Chihuiy, etc. etc. the list really goes on and on and on....)
Opinions vary about what quality living is and what price do you put on convenience, what is absolutely certain, is that there more people are moving to Miami then there are people moving away. Prices in Miami are going up (and have for well over a decade) and not going down.

I just dont understand how prices can continue to rise. When someone on a 6 figure salary or a successful business person can only afford a 900 square foot house how can prices continue to rise? Also, was there a period in the early 90's when real estate prices dropped and cooled off drastically in Miami? Someone told me that.

I just dont understand how prices can continue to rise. When someone on a 6 figure salary or a successful business person can only afford a 900 square foot house how can prices continue to rise? Also, was there a period in the early 90's when real estate prices dropped and cooled off drastically in Miami? Someone told me that.The City of Miami was bankrupt in 1996, and the only residential skyscrapers built in the 1990's were the Bristol Tower (Ugo Columbo), Santa Maria (Ugo Columbo), Tequesta's I, II, III (Swire) and maybe one or two more (Chuck knows this stuff better than I do.) Prices really tanked in the 1980's during the Savings & Loan debacle and on the heels of the Tax Reform Act of 1986.

The short answer for why prices continue to rise is supply and demand.

Some insight about 6 figure salaried people and successful business men. Successful businessmen will do the best that they can to make less than $100,000 of income If they possibly can, it reduces the income taxliability. For this reason, it's disingenuous when "housing analysts" site the price/income ratio as a measure of affordability. It is an outdated measure, especially in a young city like Miami where people bring money with them (not income) when they migrate, and there is a very large % of entrepenuers that are trying to minimize their personal incometo the advantage of growing their business assets. There are several other reasons, enough for a book, but moving right along!
If a single person makes $100,000, then they should be able to afford a $400,000 property easily. That's enough for a 900 ft + luxury condo with water views, 900 ft house @ $400 per square ft. Again, very doable.

Now, what if single person gets married or has a partner with a $50,000 income, they afford more.
What if that couple or even the single person bought a place in the Chicago burbs for $125,000 and it is now worth $375,000? They sell it and take the whole $250,000 profit tax free! The move to sunnier places allows them to plunk $250,000 cash or more down on a $650,000 place and still have a reasonable mortgage.
What if baby boomer parents or grandparents give gifts to help out their kids...you need a little less income as the statisticians measure it, to afford a home.
Etcetera.

FAR: Home sales decline in Fort Lauderdale, Miami

South Florida Business Journal - 11:40 AM EST Thursday

West Palm Beach-Boca Raton was the only South Florida area that listed a gain in the number of Realtor sales in November. Both Fort Lauderdale and Miami logged double-digit declines.

In numbers from the Florida Association of Realtors, the number of sales in West Palm Beach-Boca Raton rose 8 percent to 952 homes in November, up from 880 homes for the same month the year before.

In Fort Lauderdale, the 21 percent, November decline was to 788 homes from 997 homes. In Miami, the year-over-year fall was 25 percent, to 699 homes from 934 homes.

Dollar amounts paid for homes continues to increase, though, in all three areas of South Florida.

In West Palm Beach-Boca Raton, the 23 percent, November rise was to $421,500 from $343,300.

In Fort Lauderdale, the 29 percent increase brought November prices to $391,100 from $303,300.

The 31 percent rise in Miami pulled prices there to $381,600 in November, up from $290,800 for the same month the year before.

Statewide, the number of homes sold in November increased 1 percent to 17,219 homes from 17,110 homes. During the same time, prices rose 31 percent to $250,500 from $191,300.

The statistics from Orlando-based FAR are for existing, single-family homes.

The trade group cited "many housing industry analysts" as saying housing markets nationwide are starting to see a better balance between demand and supply, placing homebuyers and sellers on a more even footing. FAR also said November is traditionally a slower month for home sales.

The national median sales price for existing, single-family homes was $216,200 in October. That's up 16.6 percent over last year, according to the National Association of Realtors.

Interest rates for a 30-year fixed-rate mortgage averaged 6.33 percent in November, up from the 5.73 percent rate recorded last year.

FAR's sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.