It almost seems like the expectation of a housing slowdown is turning into a self-fulfilling prophecy. But fundamentals such as the slow increase in mortgage interest rates in recent weeks are also at play:
Real-Estate Speculators, Pulling Back, Help Fed Remove 'Froth', Bloomberg: ...Investors who helped fuel the U.S. housing boom by bidding up prices are now so desperate for buyers that some are offering cash bonuses in such markets as Washington. That's a sign the Federal Reserve is succeeding in removing some of what Chairman Alan Greenspan called ''froth'' from the market. Inventories of unsold single-family homes are near a 17-year high as demand from speculators wanes and mortgage rates have risen more than a percentage point from a four-decade low reached in 2003. ''We're at the turning point,'' says Susan Wachter, professor of real estate at the University of Pennsylvania in Philadelphia. ''We're all hoping for a flat market, and not a plummeting market.'' That would be welcomed by Fed policy makers as a sign that they are succeeding in slowing the economy to a sustainable pace of growth...
Applications for loans to purchase real estate are down 12 percent from the record set in June, the Mortgage Bankers Association reports. ... The falloff in demand is already being felt in regions such as Las Vegas, the fastest-growing housing market in the U.S. a year earlier. ''The mom-and-pop investors are unloading their properties,'' says Greg Sullivan, 42, a partner in Cash Now Vegas LLC, a Las Vegas company that buys homes from investors and resells them. ''When home values were going up $10,000 a month, everyone wanted in. Now, all those properties are sitting empty.'' ... Investment buying accounted for almost a quarter of U.S. home transactions last year, according to the Realtors group. ... ''This is the sign of a soft landing in the marketplace,'' Nicolas Retsinas, director of housing studies at Harvard University in Cambridge, Massachusetts, said in an interview. ''I do believe the levels of price appreciation in some of the markets, particularly the two coasts, were unsustainable. At some point they had to moderate.''
Still, demand for less expensive housing remains strong. ... The Fed is ''getting exactly what they wanted, and that is a little bit of the froth taken away, but still the economic growth, and growth that supports housing,'' Bob Walters, chief economist at Quicken Loans Inc. in Livonia, Michigan, said in an interview. Lyle Gramley, a former Fed governor ... says market forces played a larger role than speculation in pushing up home prices. Prices rose because of economic growth, low interest rates and a shortage of building lots in some markets, he says. ''When fundamental factors drive prices up, it certainly does encourage speculation and more buying by investors,'' ... ''And when the froth begins to come out of the market, those are the first people who run for the hills.'' ... Gramley foresees ''declines in home prices of maybe 10, 15 or 20 percent on both coasts on a year-over-year basis.'' ''The economy can take that,'' he says. ''It won't cause a major problem, but we don't know if it will stop there.''