“Home price drop is largest in 35 years” — not “Homes more affordable now!”
“Home price drop is largest in 35 years” is the scare headline from an AP story that begins: “The median price of a new home plunged in September by the largest amount in more than 35 years…The Commerce Department reported that the median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005. It was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970.”
That probably sounds scary to some folks (though it looks like welcome news on inflation to us and a reprieve from the rather relentless and unsupportable spike in prices over the last few years). Less featured in the article were that the “sales pace picked up, rising by 5.3 percent to a seasonally adjusted annual rate 1.075 million homes.” And, perhaps most interesting of all was the comparison of the price drop today with that of 1970. The median house price in 1970 was $23,400, while it is $217,100 today. Couldn’t the story have been written, “New housing becomes more affordable for the middle class.” But that would have been positive economic news, and we can’t have any of that.
UPDATE
As the chart below shows, new house prices are subject to pretty substantial swings, because home builders have to get rid of their inventory, but existing house prices have been on an overall upward trend for decades. As most people know, existing home prices tend not to decline much — rather the volume of transactions plummets as people hold on to their homes rather than selling.
For our final comment, we return to that AP story and this line: “The debate is whether the slowdown will be enough to push the country into an outright recession.” Why do we feel that there is a cheering section in the MSM for a recession?
October 27th, 2006 at 3:55 am
Drops in new home prices force drops in existing home prices, which can be devastating if you simply have to sell right now. My next door neighbor just went through a divorce and is now trying to sell a 3 year old house - to put it in the vernacular, he’s screwed. Like most economic shifts, this one will have winners and losers - it’s all in your perspective. Of course, if your perspective is “any news must be reported as a negative to the status quo to further the discontent with the current majority party,” all news will be presented as if we’re all losers.
Which, of course, was your point.
October 27th, 2006 at 1:49 pm
The real story, of course, is
“American money has lost 90 per cent of its value in thirty years,”