Real-estate Prices Bobble

So now it’s hit the New York Times. “Home Prices Drop after 11-Year Ascent” is the story reported by Jeremy W. Peters.

The median price of a previously owned home fell for the first time in 11 years last month, and inventories of unsold homes swelled to levels not seen in more than a decade.

But not to worry too much. Says David Lereah, chief economist of the National Association of Realtors:

“We do expect an adjustment in home prices to last several months, as we work through a buildup in the inventory of homes on the market,” he said in a written statement. “This is the price correction we’ve been expecting — with sales stabilizing, we should go back to positive price growth early next year.”

So that’s all right. But the real-estate bears, like Bill Fleckenstein think that we are heading into a bloodbath. Quoting James Campbell of the The Campbell Real Estate Timing Letter:

"The United States has experienced the greatest real estate boom in history, but the boom is now turning into a bust, and the aftermath is not going to be pretty. Present American folklore has it that a real estate decline does not have to affect the economy. That's like saying that it will rain, but you're not going to get wet."

Which will it be? A pause or a debt debacle? We’ll know when it’s over.