Housing bubble still intact — for now
Sold signs lie in front of newly-constructed homes at Sun City Huntley housing development May 24, 2006 in Huntley, Ill.
KAI RYSSDAL: We'd be lying if we said anybody can make sense of the housing market. Sales are up. Prices are up. Or they're not. Interest rates, well, nobody knows what's really going to happen there. Except maybe that Bernanke guy. But when we get a number like we did this morning people sit up and take notice. New homes are selling at their fastest pace of the year. Here's Marketplace's Tess Vigeland with what it all means.
TESS VIGELAND: First, keep in mind that this is just a monthly number, and monthly numbers do not trends make. That said, today's figures took many economists by surprise. Sales of new homes rose 4.9 percent in April, despite higher mortgage interest rates and higher prices.
Nick Retsinas directs Harvard's Joint Center for Housing Studies:
NICK RETSINAS: Reports of the demise or the bursting of the bubble of the housing industry may still be a bit premature. But I think when put in the context of longer trends, we're still more flattening than rising.
In fact, there are signs of a slowdown. The number of homes on the market is steadily increasing — 565,000 homes for sale in April. That's almost six months worth of inventory, according to Orawin Velz, an economist with the Mortgage Bankers Association.
ORAWIN VELZ: We can already see that the build up in inventories are starting to put pressure on pricing powers of builders. The median price only increased .9 percent from a year ago. So it doesn't look like it's going to be a great year, but it's not a collapse in the housing market either.
Today's figures show the median price for new homes was $238,000, up from $236,000 last April. That's a far cry from the double-digit increases of the last several years.
Economists say rising mortgage rates will continue to cool the market. But because there's more inventory buyers won't face the bidding wars they've had to contend with, making it more palatable to jump in.
I'm Tess Vigeland for Marketplace.