Replies

Thanks. For various reasons, I think that the new home median price is interesting for showing where the builders are looking to go, but to talk about declines requires that you compare apples with apples. First you would want to know how price per square foot is holding up in the various markets, among new homes only. Then, you would want to dig deeper into the data, to determine whether a decline in price per square foot is due in part to cheaper materials being used in the construction. You might also want to analyze the lot value component. Then you could determine whether a 10 percent decline in median new home prices is actually a decline, or just a comparison of two different products.

Existing home sales are also an important factor to analyze. In the aggregate, a change in existing home prices in a market is indicative of the state of the market, and it should not, as far as I can tell, be affected by builder choices, since the homes are already built.

Bottom line is, the market still has a long way to go before there is a recovery. There is still a large overhang of foreclosures out there, and if they proceed, how they will affect the overall market remains to be seen. In some markets, it seems there was a bottom in the low end. People with jobs could afford to buy a starter house at the low interest rates being offered. The question is whether that bottom will hold. I don't pretend to know, but I do think there is more room to fall at the higher end.