The Housing Bubble

Two reports show home prices falling. “Demand for new homes has shrunk in central Ohio in the past two years, causing builders to slow down construction and leaving them with an inventory of unsold houses and condominiums. The overstock and sales slump have prompted something once unheard of: a sale on some homes.”

“Showcase Homes offered up to $60,000 off a new home in January and February. Ambassador, Trinity, Mobley and Homewood joined forces to offer discounts of up to $50,000 in February. Rockford Homes is offering a free fireplace plus ’spring special discounts.’”

“‘There’s no question, it has hit everybody in our market at all price points across the board,’ Rockford President Robert Yoakam Jr. said of the market slowdown. Central Ohio contractors are left with too many houses despite building 26 percent fewer single-family homes last year than two years earlier.”

“‘The market is bearing a lot of discounting,’ Susan Cass said. ‘The buyers expect it when they come in the door. They come in asking about discounts.’”

“‘The promotions we are running today are the largest in our company’s history,’ said Jack Mautino, president of the Dominions Ohio division. During the building boom, which began in 1999, many first-time buyers were renters who were enticed into homeownership by low interest rates. That supply of buyers has been depleted, he said. Columbus has not added new jobs that would create a new supply of buyers.”

“About 12,000 residential building permits were issued for single-family homes and condos in central Ohio in 2005, he said. During the same time, the area added only 5,100 jobs, Jim Hilz, executive director of the Building Industry Association of Central Ohio, said. ‘You can’t be building 2½ units for every new job,’ he said.”

From Alabama. “Home prices fell and the pace of sales declined for the first month of 2006, indicating a slowing trend and perhaps heralding a buyer’s market in Alabama. Existing home sales in January dropped 21.5 percent from December 2005 to 3,702 units sold from 4,725.”

“Average selling price also fell in Alabama by 5.2 percent to $142,522, representing the fifth straight monthly decline. The 27,544 homes on the market in January 2006 represented an approximate 4,000-unit increase compared to January 2005.”

“‘Thought seasonable factors may be part of the explanation for falling prices and declining home sales, it appears that the housing sector is slowing down as we move into 2006,’ Leonard Zumpano said in a press release. ‘A slow but steady increase in the number of unsold homes, coupled with slowing sales, is beginning to exert downward pressure on prices in many locations across the country.’”

“Only five of the regions tracked by the center experienced an increase in existing home sales for January. Sales fell in 16 areas. Fourteen regions reported a decrease in average selling price during January, while prices increased in seven areas.”

“‘Whether January’s steep decline in home sales foretells a slow housing market for the entire year remains to be seen,’ Zumpano said. ‘For prospective buyers and the health of the market, that is probably a good thing.’”