This Week's Dire Prediction About Home Prices

Here's the riddle of the current real-estate market, as reported this week by the Los Angeles Times: In California's San Bernadino County, the number of homes sold is down 14 percent from this time last year. The price of a home, however, is up by the same percentage. In Ventura, the market is bailing, moving 24 percent fewer homes than this time last year, but the price of a home is up more than 7 percent. Only in San Diego has growing inventory brought the median price of a home down, by one percent compared to last July's numbers. With supply growing, the question is, why aren't prices falling faster?

One answer is that sellers aren't desperate enough to drop prices. It's impossible to tease motivation out of sales data, but the opposing market vectors suggest that many sellers aren't selling out of necessity. They have been lured into the market by the high prices and they have a number in mind. The price they can get for their current house, therefore, is driving the pace of sales, not the other way around. Another answer is that the inventory of homes hasn't reached true downturn proportions. It would take less than six months to sell off all the properties on the SoCal market today. While this is twice what it was two years ago, one analyst put it this way: " "We're getting closer to a normal market." And that's still a good thing.

The enigma wrapped inside the realty riddle is that builders keep adding to the housing market at an alarming rate. Earlier in the week, the Times ran this article, about the rampant, disturbing but altogether classic, development trend in the Antelope Valley, northeast of L.A.