Now this presents an interesting question. Is an increase in home sales good news if the prices of homes are down?

Sales of existing homes increased unexpectedly in February after six months of decline, but private economists said it was too soon to say the prolonged slide in housing is coming to an end.

The National Association of Realtors said sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It marked the first sales increase since last July, but even with the gain sales were still 23.8 percent below where they were a year ago.

Prices continued to slide. The median sales price for single-family homes and condominiums dropped to $195,900, a fall of 8.2 percent from a year ago, the biggest slide in the current housing slump. The median price for just single-family homes was down 8.7 percent from a year ago, the biggest decline in four decades.

Those numbers make it hard to say that we are out of the housing slump -- and analysts are predicting another six months of a weak housing market. But I can't help but remember that for the last couple of years we have been hearing that the housing market in many areas of the country was overheated and overpriced. Would this not simply constitute a readjustment of the market to reflect the actual value of the properties in question -- especially after rash speculation on the part of some buyers and sellers?

I don't pretend to have an answer to the question -- but I feel that it is an important question to ask.

Especially since the drop in prices may allow some families to purchase homes that they could not have purchased a year ago because of the inflated prices. And if so, do we really need the sort of increased government intervention in the housing market that some politicians are proposing?

Posted by: Greg at 10:12 PM | No Comments | Add Comment
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