Fed Study: House-Price Growth to Be Slow

[ender]

http://news.yahoo.com/news?tmpl=story&u=/ap/20040713/ap_on_bi_ge/house_pri es_1
(link tried to be fixed, but apparently du doesnt like mozilla firefox :-(
WASHINGTON - U.S. house prices are likely to grow at the slowest pace in more than three decades as interest rates climb and land prices take a tumble over the next three years, researchers at the Federal Reserve (news - web sites) have estimated in a new study.

The study, published on the central bank's Web site recently, asserts that if U.S. disposable income and short-term interest rates climb as much as Wall Street expects them to, nominal existing-house prices would increase a cumulative 2.6 percent over the next three years. That would mark the lowest rate since the government began keeping records in 1970. The number implies high odds that house prices will decline in inflation-adjusted terms.

The conclusions validate the unease of many private economists who fear the U.S. housing market, having benefited recently from rapid price gains that helped maintain strong consumer spending through a recession, may become a source of economic instability as interest rates climb.

[West Coast Democrat]

1. That link didn't work

I found this one:

http://news.yahoo.com/news?tmpl=story&u=/ap/20040713/ap_on_bi_ge/house_prices_1

[mapster]

2. I hate seeing this

We have our house on the market and are having, shall we say, a lot of trouble selling it because of all the new construction here. I wonder who is going to be left holding the bag at the end of the day. At least we don't *have* to sell and the house is paid for but I would still like to move into something smaller as our kids are gone and we don't need all this room.

[West Coast Democrat]

4. There are currently two homes for sale on my block

...one is a 1930s home, the other is a brand new home which was built in a small piece of land that used to be someone's side-yard. Neither one has seemed to have any interested buyers, and it's been a good 2 or 3 months...and the asking prices have dropped quite a bit.

Sorry to hear you're having trouble.

[West Coast Democrat]

3. Only National Association of Realtors Disagrees w/ the Assessment

...and I'm sure they're still telling every prospective home buyer that they'll make 15% profit in 3 years. Sounds like the tech boom!

[ender]

5. not that theres a conflict of interest there....

[aquart]

6. And the bubble collapses.

[mulethree]

7. delete

[Xithras]

8. They ignore that the tight supply conditions are artificial

Conditions are tight because there aren't enough houses to satisfy all of the current buyers, but the ranks of those buyers have been artificially swollen by the record-low interest rates. When the rates go back up, the number of people looking to buy will drop, alleviating the shortage without any new home construction.

If you're into real estate, invest in apartments or land with high density zoning. All the people who are about to be shoved out of the housing market are going to need somewhere cheaper to live.