Yesterday morning the AP released an article New Home Sales and Prices Both Drop in May
Oh no, plunging and tumbling again – well, at least it’s not plummeting, that is really scary. So what are we taking about here and does it affect Hawaii? Let’s start with the second part of that question – ‘No”. So, what are they talking about – new home sales.
New home sales figures easily confuse people because we don’t have that much new home construction in Hawaii. In Hawaii, our real estate market is mostly the resale of existing homes. New homes are very different.
• ‘New homes’ are houses built by developers in anticipation of buyer demand, not because of it.
• Sales prices are set by the developer based on conditions other than just market value.
• Changes to sales prices are reductions in listed prices, controlled by the developer.
So what is this article really saying? 1. Sales are falling. Nothing new here, sales have been falling since 2005, but developers kept building new homes anyway. 2. Prices are falling, OK, why?
As the article laments:
median prices kept plunging, underscoring the depth of the nation’s housing woes.
Source AP news June 25,2008, written by Martin Crutsinger
Doubt it! I think we have to hit the ‘hysteria’ button here. What this does mean is that the developers, who set the prices in the first place, are now lowering them because they built too many houses for a demand that wasn’t there – and then set the prices too high to boot. Now that the developers are lowering the price, this is somehow supposed to be a really bad thing. Remember, a drop in listing prices does not indicate falling prices. It means that prices set artificially high are being adjusted downward – by the people who set them too high in the first place.
All the doom and gloom that is being projected in this article is really developers adjusting prices for homes they shouldn’t have built in the first place.
And they even try to introduce ‘recession’ again. Sorry, that is old news that never happened – much to the dismay of the media. By they way, there are only ‘recessions’ if they happen – there is no such thing as a full-blown or a partially-blown recession. The media keeps trying though.
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