3/29/2005

Increase of Home Sales

In the article "Sales of new U.S. homes soar in February" it is stated that home sales have risen 20% in some areas. How long can this continue? Probably not for long, it is reported in the article that the Federal Reserve is increasing interest rate to head off inflation. I think this is very good because we don't want inflation to take over but we needed a boost in our economy.

5 comments:

rico said...

The Fed has actually increased interest rates for almost a year. Housing has continued to increase despite the rise in interest rates. I don't see too much of a decline in housing for a while.

Jones said...

I think that the increased sales of new homes has to do with our rapidly increasing population. It makes sense doesn't it? If there are more and more people in the world there are going to be more homes because they are going to need somewhere to live. I definitely don't think the growth of the population is going to slow down anytime soon so we can count on the sales of homes not slowing down either.

Harry said...

I would also have to agree that it probably has to do with the population growing. You have to look at it as a supply and demand effect. The more demand the more expensive it gets.

sierra said...

Jones made a good comment on talking about supply and demand. As long as the population keeps increasing, housing in turn will keep increasing. It is like the oil prices, the prices keep going up, and although it makes people mad, they still buy the product because it is something people really need. So, I also don't think the pricing of houses is going to go down any time soon. If you have the money, go buy some land in a nice growing spot because you could really make some money.

Dr. Tufte said...

I am not one who is too concerned about home sales.

Those who are tend to relate home sales to some "fundamentals", which tend to suggest that homes are widely overpriced. People who are wedded to that idea insist that at some point the fundamentals they are looking at have to be correct.

I am not saying that those people are wrong. However, I have looked at those same fundamentals for a long time, and my opinion is that there has got to be something wrong with them if they are making bad predictions. Unfortunately, I don't have an alternative answer.

One thing I can tell you is that this has little to do with population growth. That is a small factor in home sales, and a steady one at that. So it is very much one of those fundamentals that isn't working as a predictor in my book.