Of Bubbles and Such

The Arizona Daily Star yesterday published an AP story about the current state of the real estate market. Flush with statistics, the story was, at first read, pretty scary. But lets look at the article again, with a more critical eye:

The AP story misleads readers by calling sales volume (the number of houses sold) the "sales pace". I've never heard of "sales pace" in terms of real estate sales. To the careless or casual reader, "sales pace" looks like "sales price" and it appears that prices have declined in double digit percentages nationwide, which is pretty scary, but untrue. Only until later do you learn that nationally, the median price of new homes has declined by less than 3%. (There was no national resale home median price statistic given) After the historic run-up in real estate values that we have had over the past few years, I will take declines like that. The real estate "bubble" that the media is so interested in is not like the stock market bubble where "securities" such as Nortel went from a split adjusted $890 in July 2000 to today's price of $31. A house will not lose 96% of its value in 6 years, like Nortel did, even if it burns down.(Because under it all, is the land!) As I watch the weather reports from the Northeast and Florida too, I am bullish for the long term prospects for Tucson real estate (if we don’t run out of water!) Read the news carefully, it's not as bad as it seems. If you are not a speculator, you should do just fine. WDA