Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (205708)	11/19/2002 3:19:25 PM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 436258

Deflating Urban Legends (Wachovia Securities) Tuesday, November 19, 2002 wachovia.com In difficult and confusing economic environments, speculation abounds. From Wall Street to Main Street, attempts are made to explain performance and interpret economic data. Two of the most recent attempts include the existence of a housing bubble and widespread deflation. We believe neither to be the case. Deflation in Higher Priced Homes? There has been recent speculation that the so-called “bubble” in the housing market is showing signs of popping - in the form of deflated prices of higher priced homes for sale. However, our research suggests that this is simply not the case. By definition, if the sales prices of higher priced homes were falling faster than the sales prices of other homes, the average sales price would be falling faster than the median sales price of all homes available for sale. The top and middle charts exhibit just the opposite case. As of September, the average price of existing homes is rising at a 9.7 percent pace, while the median price is rising at a 7.9 percent pace. The same is true in the market for new homes. The average price of a new home increased 5.6 percent over the last year, while the median price increased 3.7 percent. Indeed, for existing homes, the rate of increase in average prices has exceeded the rate of increase in median prices every month since February. New home prices have displayed a similar trend, with average prices exceeding median prices for the last six consecutive months. Sorry folks, on the national level, home prices are still rising. There is no bubble bursting here. California Leads the Way? Time and time again, we hear that California leads the nation. Data from this morning’s CPI report show us a different picture. The bottom graph displays the recent regional trends in consumer prices. Residents of the Northeast are actually leading the nation in year-over-year inflation trends, and Southerners lead over the past month. There are several reasons for the disparity among regional prices. One major factor is gasoline prices. While the price of gasoline rose by 6-10 percent across the rest of the nation, it declined 2.4 percent in West over the last year. Housing costs are also affecting inflation trends. While the cost for housing in the Northeast rose 5.3 percent over the last year, housing costs rose only 2.8 percent in the West. Apparel prices explain some of the difference as well, with price declines of 3.1 percent in the West and flat prices in the Northeast. This is one case where California is not leading the nation. Inflation, though moderate, is alive and well.