Housing Bubble? What Housing Bubble?
Despite months of talk about an impending housing bubble, home sales remain at record level despite a glut of homes on the market.
U.S. resale housing market keeps getting hotter (Globe and Mail, B14)
U.S sales of previously owned homes surged unexpectedly in August, and prices reached a record high, defying predictions that the housing market was peaking. Existing home sales rose 2 per cent to a 7.29 million annual pace last month, the second-highest on record, the National Association of Realtors said yesterday. The median price rose 15.8 per cent to a record $220,000 (U.S.) and the supply of homes for sale increased.
“These are tremendous numbers,” said Kevin Harris, chief economist at Informa Global Markets in New York. “There is nothing solid in the latest round of existing home sales data to show that we’re slowing down.”
The housing market has been the main driver of the U.S. economy this decade, accounting for 50 per cent of overall growth and more than half of private payroll jobs created since 2001, Merrill Lynch said in an August report. Price appreciation helped add $5.2-trillion to Americans’ balance sheets during the current expansion, or 68 per cent of all wealth creation, the U.S. Federal Reserve Board said. The increase in median home prices in August was the strongest rate of appreciation since July, 1979.
Though mortgage debt is rising, most Americans have built up so much equity in their homes that they could weather a price drop without serious harm. Fed chairman Alan Greenspan said. “The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices,” Mr. Greenspan told the American Bankers Association. The Fed chief’s remarks on housing prices were more reassuring than a month ago, when Mr. Greenspan told a Fed seminar the housing boom will “inevitably” cool and that there might be declines. But yesterday, he said some parts of the country may be seeing unsustainably large price gains.
Quite impressive. I just sold my townhouse in the D.C. exurb of Ashburn, despite there being 150-odd similar homes up for sale in that market. While the market has cooled somewhat in terms of pace–it took nearly two weeks to get an offer rather than the several offers the first day pace when I bought it two years ago–the prices continue to skyrocket. As I’ve joked many times, my home made more money than I did over those two years.