U.S. housing decline on the horizon

February 11, 2006

Toll Brother reports orders for new homes declined 29% in thequarter ending January 31, 2006. A National Association of Homebuilders survey showed that 64% of builders are now using incentives, and 19% are cutting prices.

What It Means:

Thankfully, a slow decline, not a bubble bursting. The National Association of Realtors expects sales of existing homes to fall 4.7% this year to 6.5 million and median home prices to rise 5%, less than the 13% rise experienced last year. There is now a 5.1 month supply of existing homes on the market, a balanced market, compared with a 3.8 month supply a year ago.

Action Steps:
If you must sell in the next two years, do so now. Otherwise, wait until the market improves in three to four years - and consider downsizing at that time.