the announcement on the heels of reporting that existing home sales tumbled in June, for the eighth time in 10 months. The NAR also said that the number of homes for sale reached its highest point since 1997.

David Lereah, NAR chief economist, tells USA Today that he expects “price numbers to start deteriorating.”
·Prices of condos nationwide have fallen 2.1 percent in a year.
· Single-family home prices increased just 1.1 percent from last year.

“Prices got too high in some local markets,” Lereah said. “So you're seeing two things occur: Investors are leaving quickly, and regular home buyers are staying on the sidelines.” As a result, there's a 6.8-month supply of single-family homes and an eight-month supply of condos, according to the NAR. Compared to a year ago, existing home sales are down 8.9 percent. “Markets which have been the hottest are quite likely to see home price declines,” John Ryding, an economist at Bear Stearns, tells USA Today. “In those markets, you could see declines for the year.” In the West, which includes hot housing markets California, Nevada, and Arizona, sales of existing homes fell 17.1 percent in a year. The California Association of Realtors announced that home sales plunged 26 percent in a year and are off 20 percent for 2006.

“Affordability has probably hit a record low,” Robert Kleinhenz, deputy chief economist for CAR, tells USA Today. In the Northeast, another hot housing region, sales fell 9.8 percent. The Midwest experienced a 6.2 percent decline in sales, and sales in the South fell 5.5 percent. Peter Morici, an economist at the University of Maryland, tells the Post “prices could drop 10 percent by the end of the year, and perhaps by 20 percent 'by the time it's all over.'”

The Undercurrent, IMO?

Homebuilders are cutting back on housing starts, rising interest rates and stagnant or lower home prices are stopping people from spending their home equity, and ARM-holders are getting crushed by a sudden spike in mortgage payments.

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Thomas Cloud, Jr. specializes in financial planning and investment management based on time-tested principles taught in the Bible. His Truly Diversified Portfolios (TDP) give his clients growth of the money that has been entrusted to their care with lowered risk. For a complimentary subscription to Thomas's monthly e-newsletter go to www.diversifyyourassets.com.

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