Mark Winston Griffith

The end of the Housing Bubble

You can almost hear the ground shifting beneath us as corporate America reacts to the news that July represented the lowest levels for home sales in this country in 2 1/2 years and the highest inventory of available homes in 13 years. The Fed refrained from raising interest rates, the stock market has taken a beating (Bloomberg news reported that "H&R Block Inc. shares headed for their biggest drop in three years after the largest U.S. tax preparer said it will set aside more money for losses on its mortgage loans"), and the National Home Equity Mortgage Association and the Mortgage Bankers Association agreed to merge, presumably so that they can form a common front as the market slows down.

It looks like the housing bubble is deflating and considering we haven't heard Bush refer to his signature domestic policy, the "ownership society", in months, we can assume that this initiative is as alive as his vision of victory in Iraq.

Who's to blame? Many are pointing their fingers at sellers themselves, many of whom, despite the fact that housing prices haven't risen so slowly since 1995, are apparently refusing to get with the program and come down on their asking prices. That's understandable considering how many have been investing in real estate over the past few years with the promise of a big pay day.

Perhaps the biggest losers, at least in the short-term, are low-income and moderate-income families who have been financing or re-financing their homes with exotic, adjustable rate mortgages, betting that the value of their homes will rise quicker than their mortgage payments. On the other hand, if interest rates drop and home prices return from the stratosphere, maybe many working people sold on the American dream of homeownership may finally have a shot.

Posted by Mark Winston Griffith at August 25, 2006 11:59 PM