I just cannot call 3% +/- a bursting bubble. I call it a correction.
In march you said
But sales of existing homnes incrreased 5.2% last month.
Call it a correction for now. I would, too...but 'bubbles' relate to more than mere % change in one factor. Are sales still increasing like 9 mo. ago when this thread started? Who has been closer to right? Bubbleheads like Austin and me? Or, the optimistic, this is just a hiccup crowd. Time will tell. If you are a builder and about to go bust...does your view differ from the Realtors..some are now seeing incomes plunge...ditto for appraisers...bank layoffs...It took a long time for the housing sector to overheat. It is not going to cool off overnight.
Everyone is agreed that sales are slowed, housing is slowed, and regardless what prices do....the net activity is much much less.
If 1,000,000 houses sell a month for $200,000 each and 2 years later only 800,000 houses sell per month for $194,000, is that a 3% reduction in market or is it 22% reduction in total market activity??
We really haven't hit the liquidity phase yet....and if we get there it will be a major crisis..not a very bad recession. By liquidity I mean the lenders, like Greg's example, Fieldstone, starts sucking up the surpluses from the J. P. Morgans and Suisse's of the world; the Asians give pause to investing here [which they currently are standing in line to buy mortgage backed securities from the U.S.]; and, the regulators are forced to tighten the monetary supply and raise interest rates, then the crash is really on. That can happen. It can happen in degrees from bad to disasterous.
IMHO, when market activity slows, average price times number of sales has to be compared. And nationwide, not just in the coastal 'hot spots', activity is slower. Bankers are visiting Realtors. I don't know a builder in our market that will not throw in a Plasma TV with a sale right now. And certainly, my biz is off well over 20% in gross sales and I am being pressured for shortcut appraisals from bankers who used to not care what I charged [because it is often appraisals they are paying out of their own pocket in repos', foreclosures, work out deals]
We are clearly in a rapidly deflating bubble and the NAR, as pointed out above, is trying to claim each month that this is bottom or we are, as the NAR economist put it "within 90 days of bottom"...which means he will point to typical spring sales figures (which will be higher every year) as 'proof' the worst is over. We won't know until fall.
The economist also hedged claiming the assumption is interest rates will fall and gas/oil prices will fall due to the predicted warm winter (or as one wag put it, "the same people who forecast a record hurricane season are the same ones who are predicting an El Nino warm period.)
And I agree with Pam. Fraud and concessions are propping up prices. Take those away and the figures would be much worse.