What’s Up With the Housing Market?

Has it peaked? Will it fall?

Data on existing home sales in July was released yesterday by the National Association of Realtors. It showed a slight drop in sales, but still a very active market. From CBSMarketwatch:

July’s drop was larger than expected. Economists had been expecting a decline to 6.85 million from the initial estimate of 6.95 million pace in June. [But] despite the decline in July, existing home sales are at their third-highest level ever following record-setting sales in May and June. Sales at this level are “a real eye-popper,” said David Lereah, NAR chief economist.

Yet signs are growing that the market may be peaking. In California, which has had the hottest housing market, several news stories have appeared in the last week or two speculating that we’ve reached the top of the market. For example, the SF Chronicle reported last week that

Bay Area home prices and sales last month throttled back from their record-setting pace in June, signaling what could be the start of a cooling trend in the local housing market, according to some experts.

The median price for a home in the nine Bay Area counties in July was $514,000, down 0.4 percent from July’s median of $516,000. On a month-to-month basis, sales declined 8.8 percent, with a total of 12,862 houses and condos changing hands last month, compared with 14,104 in June, a study by DataQuick of La Jolla (San Diego County) found.

Meanwhile, the Orange County Register had the following to report:

Orange County’s hot housing market is cooling, according to the latest comprehensive monthly data. Countywide numbers released Wednesday by market tracker DataQuick reinforced what real-estate agents have been seeing first hand and earlier reports that covered only parts of the county.

Builders and real-estate agents sold 4,193 homes last month — 17 percent fewer than a year earlier, DataQuick said. The number of homes sold last month made it the slowest July since 2000.

…Orange County, which is historically the most expensive market in Southern California, had the region’s weakest housing market in July. The county recorded the biggest annual drop in sales activity and the smallest annual appreciation in price.

This is what a peaking market looks like. Declines in housing market activity start with the markets that have appreciated the fastest, and spread from there. By the end of this year housing markets may well be cooling in many parts of the country.

What does Alan Greenspan do then?