Real Estate Officially Hotter than the Surface of the Sun

by Alex Stenback on May 24, 2005

Sun_4All we can muster is WOW. The April existing home sales data hit the street today, posting a record seasonally adjusted annual rate of 7.18 million homes, besting both analysts estimates (6.88 Million) and the previous record (7.02 Million) in June of 2004 by a healthy margin.  Other bits and pieces:

  • The median sales price rose 15.1% from April 2004, reaching $206,000 — the fastest year-over-year price gain in 25 years.
  • The inventory of unsold homes rose 8.1% to 2.48 million, a 4.2-month supply at the April sales’ rate.
  • In April, sales of existing single-family homes rose 4.5% to a record seasonally adjusted annual rate of 6.28 million from 6.01 million in March. Sales of condos rose 4.8% to a record 899,000 from 858,000.
  • Since the Federal Reserve began raising rates 11 months ago, mortgage rates have tumbled by more than a half percentage point despite the 2 percentage point rise in short-term rates.

More details, and a money quote (if a little scary,) after the jump [click below]

And then there’s this:

‘"We think speculation rather than demographics is driving a substantial portion of sales, and even modestly higher rates might act to make this speculation unprofitable if prices do not appreciate to the same degree as in the recent past, as seems likely," said Joshua Shapiro, chief economist for MFR Inc.

And that’s, as they say, the rub.  From what we’ve seen, most of this speculation is occuring in the truly crazed coastal markets (we’re looking at you, Florida) so we should be relatively insulated here in the midwest.  Our position remains the same: If you are considering a purchase, don’t over-extend, and plan to stay for 5 years.  If you are considering real estate as a pure investment play, tread carefully, and be sure you know what you are doing.
ยท Existing Home Sales Set Record [cbsmarketwatch]

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