Home Prices Signal A Slowing Housing Market But Not Collapsing

Home prices have flattened out over the last year, ending the vertical surge. Per the chart above, investors can see that the price of new home sales has been rising over the last year while the price of existing homes has flattened and fallen slightly. The two have now met at an average sales price of $418,000.

Whether sale price of a home (new or existing) starts turning up or down in the coming months is not so much dependent on interest rates but more on the economy. If people have jobs and make more money, they can afford to pay up for homes. If the unemployment rate spikes, then foreclosures increase and surging supply crushes price.

As of now, the probability favors a decline in home prices, but the bigger question is by how much...