Editor’s note: The housing bubble debate has grown louder in recent weeks. Rather than add to the mix of confusing stories that attempt to decide who’s right and who’s wrong, this four-part series takes a closer at look at the numbers, what’s happening in specific markets and how the media is relaying the message.

Editor’s note: The housing bubble debate has grown louder in recent weeks. Rather than add to the mix of confusing stories that attempt to decide who’s right and who’s wrong, this four-part series takes a closer at look at the numbers, what’s happening in specific markets and how the media is relaying the message. (See Part 1: Making sense of a changing housing market, Part 2: No agreement on real estate market and Part 4: Media caught in real estate bubble fray.)

The buoyant and boisterous boom in housing may be receding in some parts of the country, but there hasn’t been a housing kaboom, according to real estate agents and analysts.

Some markets in Southern California are seeing growing inventories, a slowing in price increases or a longer time on market for homes. And similar trends have been reported in the Boston area and in parts of Texas.

The coastal areas tend to have the most volatility in pricing, said, Robert J. Shiller, an economics professor at Yale University. And “areas that have been through volatility in the past…are markets that will be more volatile in the future,” he said. Local housing markets are in constant flux, and snapshots of markets can quickly become outdated.

Nicholas Buss, a real estate market expert who works at PNC Real Estate Finance in Pittsburgh, Pa., said he has also noted a “coastal phenomenon” in which some coastal housing markets have experienced very rapid price appreciation, though he doesn’t expect rising interest rates to “crater the market. I’m not anticipating that we’re going to see any implosion in terms of home prices or any bubbles to be burst.”

Buss added, “It’s difficult to point to anywhere and say (the housing market) is really sucking wind,” he said. “In many cases appreciation has continued to gain pace.”

Housing market performance can be intensely individual in nature, experts say, and there is considerable debate over the characteristics that define a housing market boom, bubble, bust or burst. There are buyer’s markets that exist during national housing booms and seller’s markets that exist during downturns. And some markets remain largely immune to national trends.

Tell us your opinion on the housing bubble debate.

Pam Acosta, a Realtor at One Source Realty, GMAC, in San Diego, said that in her area, “The market is beginning to change a little bit. There are a lot more listings now.” Sellers can’t be cocky these days, she said, as properties aren’t selling quite as fast, or for quite as much as they did just a few months ago. “They’ll learn,” she said.

Other Southern California real estate professionals have reported a doubling and tripling of inventories over the past month in some areas, particularly those with an abundance of high-end homes.

The hot market in the Boston metropolitan area appears to be cooling a bit, said Charissa Pemper, a Realtor for RE/MAX First in Newton, Mass. “Overall we are seeing things stay on (the market) a little longer now,” she said. “We are still seeing multiple offers, depending on how things are priced.”

High-value homes are especially spending more time on market these days, she said, and properties that are brought on the market with aggressive pricing “are coming back to their market value,” she said. It continues to be a seller’s market, she said, though buyers “have a little more leeway.”

Statewide in Massachusetts, the average days on market for condos and detached single-family homes crept up from 80 in the third quarter of 2002 to 102 in the third quarter of 2003, according to the Massachusetts Association of Realtors. Median sales prices have continued to climb for homes in Boston, from $396,000 in the first quarter of 2003 to $432,900 in the first quarter of 2004, and from $269,000 to $310,000 for condos.

The condo market in Massachusetts has definitely been gaining steam as some people look for an affordable alternative to single-family homes, said Judy Moore, president of MAR. “(Condos) are appealing to first-time buyers, immigrant buyers and empty-nesters,” she said. “We’re starting to see an increase in the building of these condos.”

The MLS Property Information Network, the largest MLS in New England, found that average days on market increased from 59-64 from 2002-03, and so far this year homes in the region have spent about 61 days on market. Last year’s data is based on about 45,500 property listings, compared with 21,704 listings to date this year.

Joe Wolvek, a Coldwell Banker Realtor who operates in the Boston area, said, “Our market here is very cyclical.” Properties that are priced right sell “practically immediately,” he said, though he expects the market to tail off a bit after the spring.

Several Northeast states and California tend to exhibit cyclical behavior in which house prices fluctuate widely relative to income, said Karl “Chip” Case, an economics professor at Wellesley College in Massachusetts. In other parts of the country, “You can explain the house price run-up with income,” said Case, who co-authored a paper with Shiller about market cycles in various regions.

“The ratio of house price to income stays the same from the early 80s to now. In states where that doesn’t happen, it’s cyclical – it goes up a lot, it comes down a lot,” he said. He also said that a downturn in the housing market is not like a stock market crash, as homeowners tend to hold onto their homes and wait out a down cycle.”

During such periods, he said, “There is a standoff between buyers and sellers. Sellers hold out and buyers lowball. The amount of activity drops. Existing sales, (new-home) starts and mortgage originations drop.”

A study authored by officials at the Federal Reserve Bank of New York found that California, Massachusetts, New Hampshire, New York, New Jersey and Washington, D.C., “have tended to have the most volatile home prices as well as strong appreciation over recent years.”

Nine of the 10 least affordable areas in the country are in California, according to data collected by the National Association of Home Builders. Boston, Los Angeles, Portland, Sacramento, San Diego and San Francisco were the least affordable metropolitan areas from 1979-99, according to NAHB and U.S. Department of Commerce data.

And home-price appreciation was most rapid in Hawaii, Nevada, Rhode Island, Washington, D.C., California, Maryland, Florida, New Jersey, Delaware and New York, in that order, from March 2003-04, according to the Office of Federal Housing Enterprise Oversight. As of May 2004, about 19 percent of households in California could afford a median-priced home.

Foreclosure numbers can be indicative of housing markets that are experiencing problems and Texas topped the list in May 2004 with 8,715 total foreclosed properties, followed by Georgia with 6,194, North Carolina with 6,009 and Ohio with 5,564.

Jack Harris, a research economist with Texas A&M University’s Real Estate Center, said the market in Austin, Texas, has been marked by a surge in inventory and almost-flat prices. The supply of homes in Austin has grown from about 3,600 homes in May 2000 to about 11,100 in May 2004, or from a 2.3-month supply to a 6.3-month supply at the current sales pace, he said. The median sales price of homes in Austin dipped from $156,800 in May 2003 to $155,200 in May 2004.

“I think the real culprit there is the inventory is much higher than it used to be,” Harris said.

In Dallas, there are about twice as many homes for sale today than there were three years ago, he said. “It seems like there’s not a whole lot of pent-up demand,” he said. Dallas had a 3.7-month supply of houses in May 2000, and that grew to a 6.7-month supply in May 2004. And the median sales price of homes in the Dallas area dropped from $150,600 in May 2003 to $148,800.

Median home prices dropped most dramatically from the first quarter of 2003 to the first quarter of 2004 in Springfield, Ill.; Charleston, W.V.; Akron, Ohio; Oklahoma City, Okla.; Champaign, Ill.; and Topeka, Kan., in that order, according to data from the National Association of Realtors. Walt Molony, a spokesman for the association, said, “None of the areas experiencing declines had recently experienced rapid (price) appreciation. They are primarily areas that have had local economic weakness.”

Rick Hanselman, president of the Capital Area Association of Realtors in Springfield, Ill., said that the market in that area is typically very stable. “We don’t experience the big upswings or the lows that Boston or California does,” he said. “We’re pretty steady.”

Tomorrow: Is the media missing the housing bubble story or fabricating one?

***

Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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