I hate to sound like a broken record but the housing market continues to be a major risk for the economy going forward, as homeowners face declining capital wealth. The fallout in housing prices is evident. In October, sales of existing homes declined for the eighth consecutive month, with the median price down by a record, driven by the credit and subprime concerns.
According to the National Association of Realtors, the median price of a home across America was $207,800, down a record 5.1% year-over-year. To put it in another perspective, if you own a home valued at $400,000, your equity in your house would be lower by about $20,000. This decline in your overall net wealth would clearly impact your spending habits, especially on larger- ticket items. You may put off that new car or appliance purchase. Even the recent move by the Federal Reserve in cutting the benchmark Fed Funds rate by 25 basis points to 4.50% may not be enough.
In addition, the construction of new homes and apartments in November declined to its lowest level in over 16 years, according to the Commerce Department. The decline of 3.7% in November was highlighted by a 5.5% decline in the construction of single- family homes to its lowest level since April 1991. The report also said that applications for building permits continued to decline for the sixth straight month.
My feeling is that the ripple effect from the housing market may continue to spread into 2008, unless we see some stability in the credit and housing markets. For those looking to buy, prices have come down in some of the pricier regions across America. I did a search of properties for sale in the Tampa, Florida, region, and found some attractive pricing at this time, albeit whether it is a bottom is not clear. All I know is that an ocean front or ocean view property in Florida is a whole lot cheaper these days.