The Great Depression Online

Great Depression Online Archive Issue:

Home Prices Drop, Sales Too

Inside This Issue You Will Discover…

*** Home Sales Drop
*** Prices Too
*** Precise Designs
*** And More

Home Sales Drop

“Sales of existing homes dropped 8 percent to a 5.04 million unit annual pace in September, the lowest on record dating to 1999, the National Association of Realtors said on Wednesday.” 

We found this in an October 24, 2007 story titled Housing Market Takes Turn for the Worse, by Jeanne Morrison.

It continues…

“The drop, from a downwardly revised 5.48 million rate in August, was steeper than Wall Street had expected, and pushed inventory to record levels.”

Here we stop to ponder how less steep Wall Street must have expected the drop in existing home sales to be.  For we have our own expectations too.  We’ve expected housing prices to drop.  And we’ve expected them to drop for so long, part of us began to question the law of gravity.

Prices Too

But here we see…

“The national median price for both existing single-family homes and condominiums dropped 4.2 percent from a year ago to $211,700 and was down 5.7 percent from August.”

As for Wall Street expectations…

“’It is clearly below expectations and it is also interesting that prices have declined sharply on a month-to-month and year-on-year basis,’ said an economist with 4cast Ltd. In New York.”

What we find interesting is not that home prices declined, rather that Wall Street didn’t expect such price declines.

After the credit induced housing price inflation of 2001-2006 what else should one expect?  That prices would go higher?

Anyone with half a brain should have seen this coming from a hundred miles away.  If only they had stopped to think about it for a half-second.

But that was the problem.  Most didn’t bother to stop and think.  They just repeated the popular mantra of the time…  “You can’t go wrong with real estate, house prices always go up.”

Precise Designs

But now house prices are going down.  And adjustable rate mortgages (ARMs), a reckless creation of the times, are doing precisely what they are designed to do – adjust.  In particular, adjust upward.

And we expect that Wall Street’s expectations shall adjust downward.

But who are we to say what shall and shall not happen.


M.N. Gordon
Great Depression Online

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