If your local Realtor? is to be believed, the stabilization of housing prices and the cooling of the housing market is good for the entire community. But, how can such a slowdown possibly be a good thing? Homeowners, used to seeing double digit gains in their homes values, are concerned when their home does not sell in a matter days with multiple offers, as homes were doing until the end of 2005.
Surprisingly enough a more stable market is better for everyone, and a slowdown is not a stop. David Lereah, NAR's chief economist states, 2006 is still expected to be the third strongest on record. In this case, experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability.
In general, the overwhelming opinion of those in the know, is this slowdown will result in a stable housing market through the end of 2006. Former Federal Reserve Chairman Alan Greenspan on May 18, 2006 said that Americans' consumption could taper off somewhat now that the U.S. housing market's extraordinary boom has ended. Greenspan, in his first public U.S. speech since retiring in January, predicted there is no danger of a total collapse of the housing market.
UCLA Anderson Forecast Director Edward Leamer, who also does not expect real estate prices to fall significantly, notes that sales volume is what typically drops, and drops more precipitously than prices, as the price cycle lags behind the volume cycle. Locally we have seen this as homes have stayed on the market longer, although prices have remained stable.
According to the NAR (National Association of Realtors), Two conditions are necessary for price softness in a given area: an oversupply of homes available for sale, and adverse economic conditions ? generally a weak local job market. Fortunately, our local job market continues to be strong, with Florida's unemployment rate at 3.2 percent in May, up only slightly from 3.0 in April. Florida's May 2006 rate was 1.4 percentage points lower than the national rate of 4.6 percent.
We are fortunate in the Tampa Bay area that Florida continues to be the destination for aging Baby Boomers and others looking for vacation properties and second homes. With a strong economic forecast and a desirable destination, Tampa Bay should be able to weather the housing bubble rumors and come through the remainder of the 2006 housing market safely.
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