Housing Slowdown May Be Good

houseLast week brought a bushel of economic data and a Senate plan to tap your home loan to build highways. This week brings news on jobs and the financial health of Fannie Mae and Freddie Mac. Thursday, elephants crowd into a room at Quicken Loans Arena. Maybe the location will inspire them to talk rents, homeownership and mortgages, but we won?t hold our breath. Read on.

Could a slowdown be good?

Housing has been one of the economy?s strong points lately, perhaps to a fault. ?Prices keep hitting record highs in cities like San Francisco and bidding wars have become routine in much of the country. In Denver, which has notched double-digit increases for eight straight months, a Redfin customer recently sold a house he bought in 2013. In just two years, he netted a $100,000 profit, which he plans to spend on law school. His timing is good. Sales typically ebb at this time of year, but we?re seeing signs of an enduring slowdown, and that?s not necessarily bad. Call it a normalization of the housing market.

Let?s look at the data. Redfin?s Housing Demand Index, which tracks home tours and purchase offers in 15 metro areas to give one of the earliest signals in the market, showed a 6.7 percent drop in June, a far steeper decline than at the same time last year. We expect prices to grow a modest 2.2 percent in August.

Redfin Demand IndexThe National Association of Realtors? pending sales index, another early indicator of activity, also took a dive, meaning agents reported fewer purchase contracts in the pipeline. While it?s routine for sales to slow this time of year, the steep decline caught economists off guard.

Two broad measures of prices ? Redfin?s Market Tracker and the S&P Case-ShillerHome Price Index ? are decelerating.

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