"It's possible that the jump in new home sales in December was due to pressured buyers who decided to grab the opportunity of the drop in prices to date. It's premature to draw conclusions from the figures for a single month, but so long as we don’t see a major change on the supply side, the fall in home prices will only be brief and insignificant," says DS Investments and Securities chief economist Alex Zabezhinsky.
Zabezhinsky says that although home prices have reached an all-time high, the strong demand for housing has not been met. The real estate market is frozen as both buyers and sellers wait on economic developments. "Meanwhile, the number of new homes being added to the housing inventory is falling," he warns.
As for the credit crunch, Zabezhinsky says that both the Bank of Israel and the Ministry of Finance are beginning to worry and that the credit crunch is a warning of things to come. In addition, it is unclear whether other pressures on the banking system are due to the tightening of credit conditions or the worsening economic climate.
In contrast, Meitav Investment House Ltd. believes that home prices will fall in 2012. Chief economist Ron Eichal says that housing demand was 6% lower in 2011 than in 2010, and homes sales fell nationwide, while on the supply side, the housing supply rose by 16%, sufficient for 11.6 months of sales at the end of 2011 - the highest figure since April 2007.
"There is an inverse relationship between the annual change in home prices and the months of supply. We can definitely point to a change in the trend in the months of supply, and therefore a change in home prices."
Published by Globes [online], Israel business news - www.globes-online.com - on February 6, 2012
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