Monday, February 27, 2006

Bursting the Housing Bubble: New Home Prices Register Biggest Drop Ever

Bursting the Housing Bubble: New Home Prices Register Biggest Drop Ever

The WSJ (via The Big Picture) reports that home builders are lowering prices to sell, sell, sell. Builders are a leading indicator, and this particular indicator is pointing firmly towards a major correction.

In December, the average price of a new home was $272,900, according to the
Commerce Department. That was 8.9% below September's $299,600 -- the biggest three-month percentage drop on record. The median price (as opposed to the average price) fell by a slightly smaller 7.7% to $221,800. That is an
indication that more expensive homes have seen the steepest price declines.

Prices for existing (that is, previously owned) homes, on the other hand, have registered only slight declines. One reason is that builders are much more motivated sellers than the average homeowner is.

No comments: