Is the market bubblicious?

After all the talk of bubbles and froth, it seems like the real estate market is still speculative, at best. Although reports and data are showing a cooling market compared to the record-breaking pace from last year, there are no strong indications that there is any bubble ready to burst. A recent report from the National Association of Realtors indicated existing homes sold at an annual rate of 6.91 million in February, up 5.2% from a revised 6.57 million pace in January. This was the biggest gain since a 5.9 percent jump in February 2004.

Specifically, in the Northeast, home sales in February jumped 19.2% (1.18 million homes) or 2.6% higher than February of last year (2005); the best performance in the nation. Moreover, median prices also increased 5.2% higher than last year.

In New Hampshire, the average home sale price increased from $245,495 (last year) to $257,140 for the first ten weeks of 2006. This is good news and shows that the local market is still healthy in spite of all the lingering speculation for the past 6 months.

Bottom line: In the last few years, the real estate market has been a cash cow -- a big fat one. However, the turbo-charged pace and sizzling increase in home values is unlikely to sustain. What we are starting to see is the market going from white hot to luke warm, “housing is simply returning to a normal market, where annual home prices will rise a little faster than the overall rate of inflation,” as stated by Thomas Stevens, president of National Association of Realtors. Nevertheless, the regional market is healthy and stable, and the so-called bursting of the 'real estate bubble' is just hot air.

posted by B. Samii @ 12:39 PM