Hottest markets declining rapidly?

From the NY Daily News:

Troubles mounting in housing market

Cracks are continuing to develop in the once-booming housing market. Homebuilder optimism sank for the eighth straight month in September to the lowest level in more than 15 years, as a surge in unsold homes put development on ice, an industry survey showed.The National Association of Home Builders said yesterday its survey also showed its members see further downward momentum in the housing market.

Also, Wells Fargo CEO Richard Kovacevich said the housing market is probably weaker than economic data suggest because homebuilders are using “very significant incentives” to attract buyers.

“We will see over the next five to six months inventories increase quite substantially” as that strategy becomes less successful in tempering the decline in demand for new homes, Kovacevich, whose bank is the nation’s second-biggest mortgage lender, said yesterday at a conference in San Francisco.
…
Housing prices in the nation’s 27 “hottest markets” are “declining rapidly,” Kovacevich said. “That’s good because we were getting into bubble territory. As we all know, when a bubble bursts the smaller the bubble is, the better it is.”

Economic growth of between 2.5% and 3%, compared with the second quarter’s 2.9%, would mean the housing market will “still be very good,” Kovacevich said. Growth of less than 2.5% would make the housing decline worse, and “if we go into a recession it will be a lot worse.”

Discuss this in the forum