What’s Really Happening in the Housing Market

It’s ironic that when housing prices were rising rapidly, this news was all over the media. Magazines, newspapers, and the Internet were chalk full of positive articles on the housing market. Where are all the reporters now that the real estate market is going the other way?

Here, my dear reader, is what’s really happening in the housing market:

— Giant U.S. new-home builder, KB Home, reported a big drop in its home order cancellations and a drop in orders over the past two months.

— Toll Brothers, likely the biggest U.S. luxury home builder, said orders for its new homes dropped 29% in the company’s fiscal quarter ended January 31, 2006.


— Stocks in the Dow Jones U.S. Home Construction Index are getting a literal pounding–down 16% in only thirty days.

— The U.S. Census Bureau reported the median sale price for a new home fell 3 percent in December, 2005 from December, 2004.

It’s so typical to me that the media is not picking up on this bout of extremely bad news for the housing market. There’s no doubt that the Fed’s interest rate increases are starting to choke the housing market. And, I’m really worried the housing market could end up being another tech bubble.

I’d think twice about buying a home in this soon to be “buyers” market, because I simply believe the real bargains in the real estate market lay ahead. But, the bad news is for the economy:

The housing market was really the last leg holding this economy up. Right now, the housing market looks like it could be unraveling, and when it finally does, the economy will unravel with it causing pain for those consumers that have overextended their borrowing.