53 Steps Forward, One Step Back

This post should get everyone on the Lawrence Yun watch blog fired up.

Let's see, we are in a "market slump." The average home appreciated by 53% in the last 5 years, and now home prices are down a whopping 1%. I am pretty sure that most Americans would not mind seeing their net worths increase by 53% one day and then decline by 1% the next day. They still make out like bandits at the end of the day!

FRONT LINES: Economy
The Wrong CorrectionBY LAWRENCE YUN, NAR SENIOR ECONOMIST

But there’s no real correction where consumers are concerned. Yes, home price appreciation has slowed considerably, and nationally we’re expecting a price drop of 1 percent for 2007. But that drop comes at the tail end of a five-year spurt that increased home prices by 53 percent. We may have taken one small step back, but that’s after taking 53 steps forward.

Even a relatively large price decline, such as the 12 percent drop we saw in Sarasota, Fla., cannot reasonably be called a correction when that market had a 150 percent price increase during the boom.

When today’s consumers look at real estate markets, they need to use the same analytical approach as investors in the stock market. Those buyers aren’t generally concerned about the volume of stock trades on a given day. Why should they be? They’re focused on price trends. And by that measure, now is a great time for consumers to be in the housing market: Prices have steadied, and inventories are healthy.

http://www.realtor.org/rmomag.nsf/pages/economyjuly07