2007 March 23 Friday
Housing Sales Up But Prices Down

The number of US home sales has increased.

Sales of existing homes rose in February by the largest amount in nearly three years, but worsening troubles in subprime mortgages were viewed as a roadblock to a full-fledged rebound. The National Association of Realtors reported Friday that existing home sales climbed 3.9 percent last month, pushed up by a milder-than-normal winter that boosted sales in areas of the country such as the Northeast.

But prices are still dropping.

Even with the improvement in sales, the median price of a home kept falling, dropping to $212,800 in February, down 1.3 percent from a year earlier. It marked a record seventh straight decline in prices compared with the same month a year earlier.

The housing market is hard to measure by median sold home price. The houses getting sold might be shifting toward bigger or smaller size or more upscale or downscale neighborhoods. Foreclosures probably happen more now at lower income levels for cheaper houses. The sub-prime mortgage market until recently was pumping up the number of low income mortgage holders. Some of their foreclosed homes are coming on the market.

The effect of price drops might get cancelled out by more foreclosures and also by a reduction in credit available for borrowing. If so, prices have further to fall to complete this correction.

What I want to know: Will the retirement of the baby boomers create a glut of housing as they try to downsize into smaller housing? Or will population growth swamp that effect? Or will higher taxes to pay for retiree health benefits decrease the money available to buy housing?

Share |      By Randall Parker at 2007 March 23 10:50 PM  Economics Housing


Comments
John S Bolton said at March 23, 2007 11:54 PM:

One might compare the decade cohorts; such as the
very large one born in the 1920's vs.
the very small one born in the 1930's.
today, retirements are still dominated by the small cohort
born from the mid-30's to the mid-40's
which is a group with thrifty ways and more savings than its following cohorts, perhaps
The large 1920's cohorts retirement did not cause any deflation of house prices, did it?

Bob Badour said at March 24, 2007 4:31 AM:

John,

The baby boomers swamped the effects of all other demographic cohorts for decades.


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