Housing Doom Housing Bubble Blog

I was about to call it a night, but I stumbled across this story from KHOU:

You don’t have to drive far around town to see new homes under construction: Houston is in the middle of a housing boom.

Though thousands of new homes are being built right now, but one type is selling better than others.

Builders have never been so busy.

Houston set a record in 2006, building more new houses than any city in the country — more than 71,000.

And it’s forecast to keep those bragging rights this year.

OK, so they are building a ton of homes- how many are they selling?

Sales of those priced between $80,000 and $150,000 are down 16 percent in the last year.

Ones from $150,000 to a quarter million are down 12 percent.

Experts figure the subprime mortgage mess and abundance of apartments have contributed to that slow down, but there is a surge in some home sales: luxurious ones. Houston’s healthy economy is creating thousands of new jobs, attracting people from the East and West Coasts.

“You’d be surprised how many homes are paid with cash,” Shad Bogany with ERA Bognay Properties said. “Because they made a killing on the east or west coast and they come to Houston and they’re able to buy two or three times more house for less money than what they had back home.”

Homes selling from $900,000 to $999,000 are up 15 percent, and sales of homes priced at a million or more increased 25 percent.

There’s no word in the report as to how sales are in the rather large $150K+ to $899K part of the market. 

It seems unlikely that the sale of million dollar homes are going to carry the market.  According to the Texas Residential MLS, in the resale market, less than 5% of homes sales are in 2007 were in the $500K+ range.  It seems unlikely that the million dollar+ segment is more than a couple of percentage points, if that.

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A big hat tip to "Tobby" for letting us in on the National Association of Realtors [NAR] latest propaganda, I mean "promotional campaign."  You can see all of the full-size print ads here, but I thought I’d share some of my personal favorites: [Text will be displayed below the ads [blue comments are mine] - in deference to Doomers with older computers, I never have images wider than 600 pixels.]

You might be wondering if buying a home right now is a smart financial decision.  [No, I wasn’t] The fact is, homeownership is key to building longterm wealth, no matter when someone buys.  [Tell that to all the poor souls who bought at the top of the market a couple of years ago and are now facing foreclosure.] Studies show that, over time, most homeowners will steadily build equity.  [That’s no guarantee that you will, however.] For example, during the past three decades, home values have increased on average more than 6% per year.

Of course, owning a home is much more than a way to gain a financial edge.  It’s also where you raise a family and create lifelong memorites.  [Renters only get short term memories, I guess.] Work with a REALTOR, a member of the National Association of REALTORS, they can show you options in your area that best fit your situation. [Although there are those agents who will show you properties that will maximize their profits, but not necessarily yours.]

I beg to differ with the NAR- like most investments, timing is everything.  Let’s look at a graph from economist Robert Shiller’s book "Irrational Exuberance" and look at that "average 6%/year appreciation":

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