US Housing Bubble links to a Reuters article suggesting that the long awaited housing stall is lurking among us:
It is a scene that is playing out across some of the hottest property markets from California to Florida.
Inventories of unsold homes are rising, buyers are turning cautious, and, in some cases, prices are slipping after a period of explosive gains, analysts and real estate agents said...
"People are stretched pretty far and so when interest rates go up there is not much more people can stretch," said Cynthia Kroll, an economist at the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.
The stretching effect is starting to show in the supply of homes for sale, measured in months.
It stood at a 4.7-month supply in August, up from a record low 3.8-months in January, according to the National Association of Realtors. A six-month supply reflects a market in balance between sellers and buyers, according to the group.
The group forecasts 6.80 million existing homes will sell next year, compared with a projected record of 7.02 million this year, and that 1.22 million new homes will sell next year, compared with a projected record of 1.28 million this year.
Why worry? You know:
That could be a sign that the broader U.S. housing market, which has been an engine of economic expansion, is beginning to sputter. The slowdown could dampen consumer spending and ripple through financial markets.
Edward Hugh reminds us that, in the sputter department, the UK has already led the way...
UK property prices have been hovering dangerously around the zero price growth mark for the last couple of months. Year on year growth is of course dropping substantially and we are now just below the 3% annual mark.
...and, though causality may be hard to prove, The Skeptical Speculator notes that, indeed, British "consumer demand has faltered." Calculated Risk, for one, accepts the analogy:
It is possible that the UK is a leading indicator for the US, since the Bank of England started raising rates eight months before the Federal Reserve. The BoE started in November of 2003 and the Federal Reserve didn't start raising rates until June, 2004. The discussion now in the UK is of rate cuts...
No talk of rate cuts in the U.S. today, though, as almost everyone read the newly released minutes of the September 20 Federal Open Market Committee meeting as confirming suspicions that a pause in the northward march of the federal funds rate is still several steps down the road: The Prudent Investor says: "Expect further rate hikes and do not assume that the Fed will stop at 4.50 %." The Capital Spectator suggests that a hawkish Fed has become "the new best friend of forex traders." William Polley believes ""measured pace" really has come to mean 1/4 point until further notice" (although "to admit that a "considerable reduction in monetary policy accommodation" has "already been accomplished" seems to be a sign that as we move into 2006 we may not see increases at every meeting.")
Of course, the U.S. consumer is not mounting much of a challenge yet, so things can change.