Home Prices Drop
October 27, 2006
The Commerce Department reported today that September 2006 saw the largest year-to-year reduction for median new home prices in 35 years. An article in Business Week gives the details:
“The median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005. It was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970.”
The author labels this as a sign of the “correction in the once-booming housing market” and questions whether the decline will summon in a recession. Only time will tell where the housing market is headed but I feel for the thousands of people whose stomachs drop as the tide of real estate wealth runs back out to sea. Another example of Tulip Mania, in action.
The real estate craze reminds me of two good investment principles:
- You’re not “up” any amount of money on an investment until you sell
- An investment is only worth what you can sell it for
Remembering these principles will help us keep our head in the days of future bubbles that are sure to come.
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