A New York Times article tomorrow seems to make a fairly good case that the seemingly endless surge in housing prices may at last be coming to a long expected end. But the evidence they cite is still spotty. In only one place do they cite a serious drop in housing prices - New York - and even then it is in just one quarter and could possibly be (partially) due to a different inventory mix in that quarter.
DAVID LEONHARDT and MOTOKO RICH
A real estate slowdown that began in a handful of cities this summer has spread to almost every hot housing market in the country, including New York.
More sellers are putting their homes on the market, houses are selling less quickly and prices are no longer increasing as rapidly as they were in the spring, according to local data and interviews with brokers.
In Manhattan, the average sales price fell almost 13 percent in the third quarter from the second quarter, according to a widely followed report to be released today by Miller Samuel, an appraisal firm, and Prudential Douglas Elliman, a real estate firm. The amount of time it took to sell a home was also up 30.4 percent over the same period.
Mainly, the reported slowing of the market is reflected by increasing inventory and longer sale times. The reporters also mention that credit standards are being tightened - which is long overdue - and that the days of low interest are over. The second part is still questionable though. A few nudges by the Fed and the run up in gas prices and possible shortages in building materials needed for the rebuilding of the Gulf Coast are - so far - short term events; not a systemic change. And an increase in energy conservation, could bring those prices down again.
But as the more recent loans with low teaser rates expire - that will hit a lot of new homeowners, hard.
As for what this means for Los Angeles, in the most expensive areas, prices do seem rather high for lower quality product. But in much of the city, the demand so far exceeds the supply, I do not see a major price break in the next few years, barring, of course, some major external factor. Prices, I suspect, will level off, then decline somewhat, particularly for marginal product, but also at the very top of the market.
And if prices do come down on the new product coming on the market in Downtown LA - that is a good thing. Lower prices will mean more people will be able to buy, and even right now, the supply of buyers exceeds the amount of product that is coming on-line, even at today's prices.
There is one caveat to that scenario, though. Right now there is little street life in the loft districts, and even less night life. The Broadway theaters appear to be on the verge of re-opening, but the question of what programing they will have still remains open.
We also have no great books stores, no vintage clothing stores, no antique stores, no music clubs, no 99 seat theaters, no Indy film houses, no record stores and none of a hundred other ammenties we need to create a true urban core.
Now many, if not most of these things, appear about to happen - posilby as soon as next spring and summer, if everything goes right. But everyone Downtown needs to realize that just as housing was the key to starting the rebirth of Downtown, having the streets of Downtown active 24 hours a day, 7 days a week is essential if the housing revival and the overall rebirth of Downtown is going to continue.
A decline in the national hot housing market is inevitable; a decline in the number of units being built in Downtown is not.