U.S. Economy: April Home Resales Jump to Record (Update4)

[bemildred]

May 24 (Bloomberg) -- The median price of a previously owned U.S. home topped $200,000 for the first time in April, capping the biggest increase in a quarter century, as Americans bought housing at a record pace.

Low mortgage rates and increased employment drove resales of houses, condominiums and co-ops up 4.5 percent from March to 7.18 million units at an annual rate, the National Association of Realtors said today in Washington. The price for all housing types rose 15 percent from April 2004 to a record $206,000, led by condominiums and co-ops and houses going for more than a half- million dollars in California.

``Every single month this year the annualized sales pace exceeded the record-breaking number last year, and we're gaining steam,'' said James Gillespie, chief executive of Parsippany, New Jersey-based Coldwell Banker Real Estate, in a telephone interview. Coldwell is a unit of Cendant Corp. ``This year we very well could see a new high.''

Federal Reserve Chairman Alan Greenspan last week said the housing market has ``a lot of local bubbles'' and ``a little froth.'' Investors' increased confidence that the Fed is keeping inflation at bay is holding down long-term interest rates, and average mortgage rates fell in recent weeks.

Bloomberg

[jmowreader]

1. Watch Cendant, it's rapidly becoming a monolith

Cendant used to be called Hospitality Franchising Systems, Inc. They were the biggest franchisors of midpriced hotel properties in the world. Among their brands are Ramada and Howard Johnson's.

Now they're Cendant, and instead of being JUST a hotel franchisor, they also do travel (cheaptickets.com and orbitz.com in addition to plenty of walk-up chains), rental cars (Avis and Budget), realty (Century 21 and Coldwell Banker), hospitality reservation systems...

It's a neat synergy, really. If I decide to move cross-country, I will need transportation, lodging, a realtor...and I can do all of that through Cendant.

[bemildred]

2. I just love exponential growth.

It gives me such a swelling, bursting sort of feeling.

[xchrom]

8. ok -- this is not a sex thread!

now i have to get those ''swelling'', ''bursting'' thingys out of my mind.

[bemildred]

10. Sploooshhhhh!

But then comes the inevitable deflation.

[xchrom]

12. lol -- stop it!

bad, bad, bad bemildred!:smoke:

[cliss]

3. This is not as wonderful as it may seem.

When housing prices escalate to the stratosphere, there are some attendant problems, which may far outweigh the "pot of gold at the end of the rainbow".

1) Property taxes will increase, dramatically. This may price some people out of their homes, especially older people, or people on fixed incomes. They can't afford to keep their homes.

2) Causes people to think of their homes, not as a place to live, but an "investment", like a 401(k), or worse, the stock market, where they can roll the dice with risky home loans, with hidden fees & sneaky high interest rates.

I've read that the real estate market is actually in a crisis situation here in the US. Apparently, our manufacturing base is completely gutted, so capital is desperate for something to invest in, like companies or infra structure, but there's nothing out there, so capital gets plowed into the real estate market, and keeps pushing it up, up, up.

Bad news.

[K-W]

5. It isnt remotely wonderful.

It is driven by working class debt, unrealistically low interest rates, and speculation.

Basically people are buying overpriced commodities with money they dont have.

[TexasLawyer]

20. Bubbles

It's bad news especially when the bubble bursts.

[K-W]

4. Nothing smarter than taking out a huge loan to buy overpriced real estate.

Im sure these people have glowing financial futures.

[Straight Shooter]

6. Resales. Call me ignorant, but that means someone sold their home.

That means more people are selling their home. So, they're either buying someone else's home, or they're out on their butt and looking for a cheap rental because they can no longer afford their own home due to economic misfortune.

Someone correct me if I'm wrong, but I don't read this article as a positive outlook.

[progressive_realist]

18. Agreed. Resales add nothing to the economy.

Reselling, whether of houses or other assets, just shuffles money and ownership around. It does not create value or add strength to the real economy.

Since the overall rate of sales is rising, your first condition is probably more accurate than the second. If people were selling without buying another house, overall sales (and prices) would be dropping. What is more likely is that lots of people are trading in their current houses for more expensive ones.

One of the key factors driving the housing boom is cheap credit, i.e. low interest rates. Those allow people to take out larger loans. Which they do, driving housing prices up.

All those loans increase the money supply, which under current economic conditions cannot help but lead to overall price inflation. Unfortunately, that will affect even those of us who did not take out expensive mortgages.

Thanks to the Fed keeping interest rates too low for too long, it appears the U.S. is headed for a period of stagflation again, which the bursting of the housing bubble will only worsen.

[Straight Shooter]

19. Thanks for the info. I am ignorant no more :)

Welcome to DU :hi:

[hatrack]

7. What goes up WILL come down - oh, and it isn't "different this time"

This, like all financial bubbles, is fucking insane.

[xchrom]

9. this scares me.

at some point i was going to sell my place and look for a cheaper place some where else.
have some money in the bank etc.
this looks far less likely.

i can't afford a world where everything is going sky high.

[bemildred]

11. Whatever you do, it's probably wrong. nt

[xchrom]

14. bad bemildred, bad!

lol.

you're supposed to console me -- tell me it'll be alright.
sooooothe me.

[bemildred]

16. It's an issue that concerns me.

If I sell inflation will kill me.
If I keep the house, the price will deflate and kill me.
If I sell it and put it all into tents and guns and ammo,
I might have a chance. If I didn't have a house I expect
I'd be looking for a community to join, as people have in
troubled times since the beginning, there is strength in
numbers, although that is not something the "News" media
choose to remind us of much.

[bemildred]

13. To be fair, I'm thinking mobil or prefab or maybe a tent.

You can buy a heck of a lot or pretty nice tents for a months rent.

[xchrom]

15. it's hard to decorate a tent.

no place to hang a mirror and make it look bigger.

and where do you put the buffet?

and you'll NEVER catch this little gay boy in a trailer -- can you imagine?
well actually -- i could come up with a drag act for the local ''drink and drive'' that could make bucks on the side.

[bemildred]

17. Hah. And you say I'm bad. nt