The REAL Real Estate story

From the WSJournal we have a story about home sales:

"Sales of newly built homes tumbled last month, but a firm reading on orders for big-ticket factory goods suggests the economy will continue to grow moderately despite head winds from a slumping housing market and high energy prices.

The Commerce Department said sales of new homes in July fell 4.3% from June to a rate of 1.07 million units, a pace that is 21.6% slower than a year ago. The inventory of unsold homes on the market rose to a supply of 6.5 months, up from 4.2 months a year earlier, while the median price fell to $230,000 in July and is essentially flat compared with a year ago."

But the actual situation may be worse than it looks from the numbers.

Home for Sale, by Anxious Owner - New York Times

"In California, the Northeast, South Florida and parts of the Southwest, deal sweeteners like these are playing an increasingly important role in supporting home prices. From large national home builders to individual homeowners, many sellers are offering thousands of dollars in perks, including straight cash, so they do not have to slice deeply into asking prices.

But these discounts are almost entirely missing from the statistics on new-home prices reported by the government and on existing-home prices reported by the National Association of Realtors. As a result, home prices may now be falling, despite what the official numbers show, many economists say.

The use of rebates helps home builders and individual sellers by making the real estate market look healthier than it may truly be and by preventing a snowballing decline in home prices. It also keeps commissions for real estate agents higher than they would otherwise be."

and:

"Mr. Zandi, the economist, said he believed that the use of perks was now approaching its peak and that sellers would soon be forced to cut list prices more heavily. He predicted that the home-price data released by the Realtors association would show a year-over-year decline, relative to the same month a year earlier, before the end of this year. If so, that would be the first such drop since 1993. The Realtors have never reported a drop in the annual average of national home prices, a fact frequently cited by real estate analysts.

“The reason the Realtors’ data has never showed an outright decline” before, he said, “might be that they’re not measuring the effective price.”