I love Naples Florida
 
Via Big Picture, I saw this NYT's David Leonhardt's Dec. 6 article "What Statistics on Home Sales Aren’t Saying" describing the "real state" of the housing markets as counterpoint to the media's sudden softening on the housing bubble (Toll Brothers , Greenspan saying the housing slump is close to over, etc.).

For the article, Leonhardt chose Naples, Florida - the #1 overvalued metropolitan market according to Global Insight/National City Housing Valuation Analysis (June 12, 2006). He chose home auctions as his gauge for state of American housing. Auctions are an effective home selling technique (see Pax Bay Area for more information on the auctioning process) usually employed as the last resort for a house that won't sell because it guarantees sale to the highest bidder. He then continues to state how prices paid at these Naples auctions were 17-28% lower than their original purchase prices in 2005 (btw, the auctioneer may take up to 10% off the top and may recompensate auction buyer and listing agents). And he implies these losses reflect the hidden side of falling housing prices that the media doesn't seem to acknowledge.

Yes, I agree there are many markets where investor flipping activity caught investors with their pants down and headed to auctions. Yes, prices are falling and perhaps inventory will continue to grow in these markets as Leonhardt projects. This story only highlights the problem of these areas. Then, Leonhardt steps over the line:

In bubble-ista fashion, Leonhardt takes Naples as the poster child city of "things aren't too rosy" (and I bet they aren't, I see what's happening closer to me in California's Central Valley) and applies its condition to the general market as the first indication of the impending crash being propelled by homeowner debt loads. He then makes comparisons to other recent crashes (Asia meltdown in the 90's, the dotcom bomb) and says we're living on "borrowed money and borrowed time".

Yes, I get it... but I don't see the point of parading Naples Florida home auctions - the bleakest possible examples of irrational investments gone bad - as the symbol for impending doom. Housing markets are local, crashes will happen... and who knows what will happen if interest rates start dropping to maintain the economy as posited by the financial press lately. As I always say, nowadays economic conditions can change on a dime... and prediction is difficult.

Related articles - a tribute to Tom @ The Real Estate Bloggers, who has similar thoughts on this topic:

• All Real Estate is Local - Some SF Communities Still Strong  
• Housing Prices Adjust, Rental Rates Soar
• Flippers Bigger Part of Real Estate Market than Previously Thought