Housing Bubble - Maybe, Maybe Not.

The news on Monday was not good. It looked, in fact, like the housing boom was over and that was the thrust of a lot of the media headlines. Not that a market crash seemed likely, but it did seem as though the housing bubble had developed a tiny little leak.

The National Association of Realtors released its monthly report on the sales of existing homes for the month of October and NAR figures showed a "moderate" decline in activity for both single family homes and condominiums. Total existing home sales including single-family houses, condos, townhouses, and co-ops were down 2.7 percent from September figures to a seasonally adjusted annual rate of 7.09 million units. September sales had been at a rate of 7.29 million. This rate still put sales 3.7 percent above the seasonally adjusted sales figures for October last year.

Condo/co-op sales took most of the hit, dropping 4.4 percent to a seasonally adjusted annual rate of 862,000 units from the 902,000 logged in September. Sales, however, were still stronger than one year ago, running 6.7 percent above October 2004 levels. Single family houses were actually only down 2.5 percent from the previous month and were 3.3 percent above October, 2004 figures.

The median single-family home price in October was 216,200, 16.6 percent higher than one year ago and the median price for condos was 229,800, 15.3 percent more than one year ago.

Three of the four regions of the country saw sales decline less than 2 percent and all showed substantial increases from October 2004. The Northeast, however, declined 7.4 percent from September to October and was flat compared to October 2004. All four regions, including the Northeast, had median price appreciation of at least 10 percent since last year.

Housing inventories (homes sitting on the market unsold) were up 3.5 percent at the end of October to 2.87 million units. At the current rate of sales this represents a 4.9 month supply of housing.

David Lereah, Chief Economist for NAR stated that the drop in sales and rise in inventories "signals that the housing sector has likely passed its peak. Make no mistake," he said, "slowing has occurred and we expect further cooling in coming months." He projected that the year would end with record total sales of 7.11 million but would slow to 6.86 million in 2006.

Well, that was Monday. On Tuesday the U.S. Census Bureau and the U.S. Department of Housing and Urban Development released their monthly report of new residential sales for October. The preliminary estimate of sales for the month, 1,424,000, was a huge jump - 13.0 percent - over the revised September rate of 1,260,000 units and was 9.0 percent above the estimate for October, 2004. The median price of a single family house sold in October was $231,300. There is an inventory supply of 4.3 months at the current sales rate.

As usual there was considerable disparity from region to region. Both the Northeast and the West recorded increases of over 40 percent while the South barely eked out a 1.9 percent improvement over September and the Midwest lost 9.5 percent.

So is the housing market slowing or surging? There is probably no point worrying about the NAR figures as one month does not make a trend and as the two surveys use different methodologies the disparity is not unusual.. The stock market, however, reacted strongly to the HUD/Census Bureau report with homebuilding stocks rising sharply early in the day.