Drop in Median Home Price Foreseen–Letter to NY Times

 

I think the fact that the median price of homes is decreasing is a necessary prelude to a recovery of the United States housing market.
 
Here in the Las Vegas area the days on market are increasing as sellers are hanging on to their homes in a desperate attempt to gain more from the sale of their house.  The median price of homes is not decreasing significantly,however. That is at the heart of the problem. Prices must come down.  Expand this local situation into a national picture and it is only when the overall price of sold homes begins to decline that more that buyers will act to purchase homes in a housing market where there is excessive inventory. 
 
Another factor that is restraining buyers, in addition to overpriced homes on market in an excessive inventory environment, is the tightening up of credit to home buyers. This latter condition will alleviate as credit markets regain their composure,which they will.  Although with more caution in the lending terms that are available.
 
There are no shortcuts to a recovery of this market.  It is going to take time.
 
With respect to the impact of the housing market on consumer behavior, I think this will not be consistent throughout the economy. It will be a checkerboard effect, as some will be affected and others will maintain their normal consumer patterns,but there is no doubt that the housing market downturn will have some negative  impact on consumer confidence and behavior. But not enough from what I have personally observed to cause any kind of serious recession.
 

 

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