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First Cracks Seen in Housing 'Bubble'

According to several recent reports, the pace of home price appreciation actually increased in the second quarter of 2005, building upon several years of stronger-than-expected price gains. But one economist not only believes there is a housing bubble. He says it may already have popped.

Steve Sjuggerud, chairman of Investment U, says that while the volume of home sales has been up, median prices have fallen. The median price of a home fell in July by "a whopping 7.2%," Mr. Sjuggerud said in a recent news release.

Moreover, the median price has declined 14% between April and July, he said.

That doesn't necessarily mean prices have fallen - the National Association of Realtors notes that the median price is affected strongly by the mix of homes sold in a given month. If more starter homes and fewer trade-up homes sell in a given time period, for example, that puts downward pressure on the median price.

But Mr. Sjuggerud sees signs that the housing market is loosing steam. The stock price for homebuilders has fallen in the last month, he noted. An index of homebuilder stocks is down 10% from its high earlier in the summer, he said. That, he believes, may be a leading indicator of where home prices are headed.

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