I don’t have the answers, and I’m not going to say the drop in the median sale isn’t troubling, but I do have a number of questions (I can be a real pain when it comes to that):

- Is there a reason to think that the geographic mix of new homes is different in the summer than it is in the winter? (I’m guessing yes, as new home sales happen year-round in CA, AZ, and Seattle, which I believe are among of the hottest areas, while they are compressed into April-Sept. in much of the rest of the country because of weather.

- Is the rest of the country, where prices are lower, in the midst of a building spree that was taking place last year only in the high-end markets?

- Is there a lot of mid-market and low-market housing coming onto the market now, while the high end has slowed down?

- Is there a softening in new home prices but an increase in selling prices of existing homes?

Without answers to those four questions, it’s difficult to determine whether pessimism is warranted.

I also want to see what the latest OFHEO.gov report has to say. The second quarter report will be out on Sept. 1. I think it will point to a flaw in generalizing your point that “new home market prices have fallen 14% in the last three months” to the entire housing market. Your graph would predict that they will report a decline. I would guess that they will report an increase of 1%-2% during the quarter nationwide–relatively modest compared to the last couple of years, but an increase nevertheless. Because of geographic and demographic mix, it’s very possible that every market can show an increase while the nationwide median selling price goes down.

I certainly don’t disagree with your advice in this area at the linked page.

Yes… the commerce department reported a record month in July for home sales. But what they didn’t report is that the median home sale price was down 7.2% in July and has dropped 14% in the last 3 months. This party is over.
The Beginning to the End of the Housing Market?
http://www.investmentu.com/IUEL/2005/20050825.html

(comment inadvertently deleted by BizzyBlog but later inserted–I apologize for the error)