Rising Inventory Putting Pressure on Prices

A continued rise in inventories of unsold homes in August signals further downward pressure on home prices in many parts of the U.S.  

Inventories of homes in 18 large metropolitan areas expanded by 3.5% in August, according to data compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data are based on single-family homes and condos included in local multiple-listing services of homes for sale.  

The biggest increases included 8% in Orlando, 6.4% in Seattle, 6.1% in San Francisco and 5.6% in Miami.  

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Is the Real Estate Bubble Deflated?

To hear the news media talk the death of the real estate bull market is a foregone conclusion. There is, after all, a near unanimity among news publications of all stripes - including those known as being permanently bullish on stocks and real estate - that the real estate bubble is in the process of deflating with no hope of a comeback in the foreseeable future.  

Everywhere one turns, it seems, one can't help hearing about the demise of the real estate bubble. This topic of discussion has made quite a resurgence in recent weeks as evidenced by the number of times the term "housing slowdown" has been mentioned in recent Internet blog posts or chat boards.  

For instance, CNNMoney.com recently published an article entitled "Deflating the real estate bubble." It said, "Forget all those predictions about a soft landing…" From there we're told the real estate deflation isn't over yet and we could be in for a long winter, so to speak.  

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Housing Markets Pushed Into Overpriced Category

Despite a cool-off in home prices, more markets are overpriced than ever, according to a new survey.

Higher interest rates, especially for adjustable rate mortgages, helped push some housing markets into the overpriced category last quarter, according to Jeannine Cataldi, an economist with Global Insight, which conducted the analysis with National City.

Though rates have declined since the end of the second quarter, the 30-year fixed rate is still at 6.4 percent versus 5.8 percent a year ago. The difference for ARMs is even bigger.

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Housing Construction Down 6 Pct. In August

Housing construction plunged in August, falling to the lowest level in more than three years as the once-booming industry showed further signs of a dramatic slowdown.

The Commerce Department reported that construction of new homes and apartments fell by 6 percent, the third consecutive decline and a much bigger setback than analysts had been forecasting.

The weakness pushed the annual rate for construction down to 1.665 million units, the slowest pace since April 2003.

Meanwhile, wholesale prices edged up a modest 0.1 percent in August, and outside of energy and food, prices actually fell for a second straight month. That hadn't occurred in more than three years, the Labor Department said.

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Foreclosures Continue to Fall  

By any measure, things are getting tougher for American homeowners.   Online foreclosure-data service RealtyTrac of Irvine, Calif., said 115,292 properties nationwide entered some stage of foreclosure last month, a rise of 24% from July and nearly a 53% increase from a year earlier.  

Foreclosure.com of Boca Raton, Fla., which also tracks foreclosures nationwide, said new residential foreclosures fell by 6.7% in August from July to 26,255 nationwide. The company's figures, however, show that foreclosures are up 7.3% compared to August 2005.  

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