MM:Here is analyst view that housing party will be nearly over come the middle 2005. (i myself am looking for historic charts of housing booms and how they ended---know of such charts). This only concerns me because i think it is the linchpin to one of 4 primary wheels holding our economy above water; we only need one wheel to fall off--for someone preoccupied with a looongterm short such be that moment is of major interest to say the least(g)
NEW YORK (Reuters) - For over a year, headlines warned of a U.S. housing bubble and the inevitable bust. But home builders have kept setting records constructing new homes. And prices of new homes in some areas continued rising -- 20 percent higher in some areas than they were last year.
So where's the bust?
It's missing in much of the government's official housing data. On Tuesday, the U.S. Commerce Department (news - web sites) said sales of new homes dipped to a seasonally adjusted annual rate of 1.326 million units in June -- down 0.8 percent from a record pace of 1.337 million units in May.
Once again, the housing sector defied economists' expectations for a drop-off. The new home sales figures came a day after the National Association of Realtors reported that existing home sales jumped to a record high in June.
But the data hasn't changed housing analysts' minds.
Unlike the stock market, where the tech-loaded Nasdaq Composite Index (^IXIC - news) lost 37 percent in just three months in 2000, the housing market won't suddenly pop, experts said.
Instead, it will deflate as if it sprung a slow leak.
"The stock market focuses on bubbles because that's what happens in the stock market. It just collapses," said Natexis Bleichroeder analyst Barbara Allen. "That isn't what happens in the housing market. You get some markets where you will get price declines. That's happened in the past in California and in the Northeast, and I think we'll have it again, over a period of a couple of years, though."
Allen said there already are pinhole leaks.
FIRST-TIME BUYERS HURT
"The first signs that we've seen of it has been the Midwest and companies focused on first-time home buyers," she said, referring to Dominion Homes, Inc.(Nasdaq:DHOM - news), whose sales volume dropped 44 percent in the second quarter.
"You're starting to see the impact of higher rates on the first-time home buyers," Allen said. "If you get rates that go up, it will be more difficult for them to qualify."
While still near the lowest levels in a generation, mortgage rates are a little more than half a point higher than their March nadir.
In June, U.S. sales of new homes fell 14.2 percent in the Northeast and 13.1 percent in the West, according to the Commerce Department statistics released on Tuesday.
HSBC economist Ian Morris said that with home sales setting record highs in May and June, the downside in the residential real estate market is about a year away.
"The timing of it is difficult," Morris said. "But by the middle of 2005, the party will be over." Prices are 10 percent to 20 percent too high, he said.
THE FED GIVETH ... AND TAKETH
The Federal Reserve (news - web sites) created the housing boom by driving U.S. interest rates to 46-year lows, and the Fed also will be the architect of the housing slowdown with its current policy of rising rates, Morris said.
The fallout from the stock market crash of 2000 and the subsequent three-year bear market will look tame compared with a decline or even a leveling off of housing prices, Morris warned, because more people have more of their wealth tied up in their homes than they did in the stock market.
"Some academic studies suggest that the negative housing wealth effect could be more than twice as powerful as an equity wealth effect because your average person owns a home, but doesn't necessarily own that much stock," he said.
Many experts said the areas at most risk are the hot spots of the New York, Boston and Chicago metropolitan areas, and above all, California, where the median cost of an existing home in June rose to a record $469,170 -- up $100,000 in a year. In May, when the median price was slightly lower, only 19 percent of households in the state could qualify to buy a median-priced home, Allen said.
But Morris said the risk is spread nearly nationwide.
"I get 20 states plus (Washington) D.C. looking pretty rich compared to their histories, and that accounts for half the population," he said. "It's a bit more than a few local bubbles here and there.">>
Market Data 
Markets 
AI
