Unmaking the Myths

Unmaking the Myths: Weekend - Yahoo! Finance: " Real Estate
Unmaking the Myths
FORTUNE on CNNMoney.com
By Shawn Tully

Real estate survival guide: The sudden shift in the nation's housing markets is exploding some long-held beliefs. Here's the conventional wisdom you should ignore.

NEW YORK - The sudden shift in the nation's housing markets is exploding some long-held beliefs. The first is that a scarcity of buildable land on the coasts keeps a cap on supply and prevents prices from falling.

But high prices inevitably work their magic, encouraging more people to sell existing homes and sparking new construction. Sure enough, prices are already tumbling in Boston, where a swarm of downtown condos is swelling the number of properties for sale and punishing the price of all housing.

A second myth is that today's big homebuilders learned their lesson in past downturns and now launch projects only when they have firm buyers lined up. But housing starts are still running at near-record levels of some two million units a year.


Go to CNNMoney.com to see which markets are hot and which are not.


Big builders, notably D.R. Horton and Pulte Homes, are starting 20 percent to 30 percent of their units on spec, without signing up buyers in advance. Risky move.

A third tenet holds that home values never drop in areas where employment is rising. But today some of the hardest-hit regions rank among the strongest job machines, notably Northern Virginia and San Diego. The reason: Young buyers filling those jobs can't afford the houses for sale.
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