Any adjective works, as long as it’s not “strong”

Nov.November 02, 2007 04:37 PM

The media can’t resist. After breathlessly chronicling for the past few years the rise in the housing market, both in New York and nationwide, the media has now switched its tune markedly, trading awe in the face of red-hot real estate numbers for cautious candor now that the market is undoubtedly cooling.

Like the chicken and the egg, some may argue which came first — the worsening market or the media coverage about the worsening market. Undeniably, though, the two feed off each other. Here’s some choice nuggets.

“There are limits to how high is up”
Many Americans who planned on real estate as their path to wealth are beginning to find that there are limits to how high up can be.

Blame market forces. As higher interest rates dampen demand in cities and suburbs that only a year ago were battlegrounds for fierce bidding wars among numerous buyers, sellers are grudgingly lowering their prices to drum up interest.

A house at 57 Marina Boulevard in San Rafael, across the bay from San Francisco, was originally listed at $1.45 million. The owner recently dropped the price to $949,000 when a competing house on the same street lowered its price to $959,000, from $989,000. County records show that 57 Marina Boulevard was sold in February for $700,000. The owner, Dan Marr, is unlikely to lose money even at the lower price, though he may not make as much as he had hoped. “I don’t want to talk about it,” he said.

What is happening in Marin County is being repeated in cities and suburbs across the United States. Nearly a year after the sales of homes peaked, buyers are wresting control from sellers in many areas as inventories of unsold homes have grown, in some markets doubling. The New York Times, May 9, 2006

“Secret worries of real estate professionals”
If the secret worries of real estate professionals are any indication, home prices could be heading for a swoon.

When Brad Inman of Inman News, which tracks the real estate industry and is widely read by industry insiders, recently gave real estate agents the opportunity to blog about market conditions, they almost uniformly described them as bad — and getting worse.

“Normally, brokers and agents tend to sugarcoat the news; they don’t want to affect consumer confidence,” says Inman. “By letting them post anonymously, we gave them a way to really share their thoughts.”

Most responded with tales of high inventories, slow sales, and languishing prices. CNN/Money, April 18, 2006

“So far, job growth is cooperating”
“Our experience says prices do not go down when there’s job creation in the local economy,” said Lawrence Yun, senior economist for the National Association of Realtors. “In local markets where they are flat on jobs, they could see prices decline. But we’re projecting 2.3 million new jobs this year. The job market is providing a buffer. It’s a counter force to rising rates.”

So far job growth is cooperating. The economy created 590,000 new jobs in the first quarter, according to the Labor Department — an annual rate just under 2.4 million. The unemployment rate is seen holding steady at 4.7 percent.

Yun’s group is calling for prices of existing homes — which account for about three-quarters of all homes sold — to rise 6.4 percent this year while new home prices gain 2.3 percent — even as sales decline. CNN/Money.com, May 3, 2006

“…but not crashing.”
The housing boom has ended.

But that doesn’t mean a real estate bust. In most markets across the country, home sales continue at a brisk pace. And in some metro areas, prices are rising even as fewer houses are selling.

“It’s not like we’re seeing this market go from red-hot to icy cold,” says Mark Vitner, senior economist with Wachovia Corp. “It’s still pretty good when you look at the total number of sales.”

The numbers show housing sales in many markets have slipped from the hot pace of the past few years. Those record years were driven by rock-bottom mortgage interest rates, easy credit, increasing investor interest in real estate and population increases. But rates have risen, credit is tightening and investors in some areas are getting cold feet. MSNBC, May 15, 2006

“Watch your language”
Luxury is out. Old-World Elegance is in.

As the city’s real estate market slows, even the want ads must work harder.

Brokers [in New York] are freshening up their verbiage and pumping up the volume in newspaper and Internet ads. Luxury is one of the words they’ve dropped from their lexicon.

“It’s so overused that it has lost any sense of meaning,” said Neil Binder, a principal at Bellmarc, a residential brokerage.

Instead, ads say Old World Elegance — which is supposed to make you feel “like you’re royalty,” Binder said.

What brokers want, above all, is your attention — and they have just a few lines to get it. Every word is fraught with meaning. “The ad itself doesn’t sell you the apartment — it’s there to get you to call, so we can build a relationship and see apartments together,” Binder said. “Its purpose is to get you to make an appointment.” The New York Daily News, May 7, 2006

“Relying on wishful thinking”
The current boom has spawned one new myth of its own: Hot markets will glide to a soft landing.

The National Association of Realtors and the National Association of Home Builders argue that housing is simply returning to “balance” and that prices across the country will resume “normal” increases of 4 percent to 6 percent this year and next.

“It’s a good sign to see home sales holding close to the level of a strong rebound in the month before,” said David Lereah, the NAR’s chief economist, in a statement accompanying the latest data. “This is additional evidence that we’re experiencing a soft landing.”

But the housing bulls are relying on wishful thinking. The total inventory of homes for sale, new and existing, stands at a staggering 3.8 million units, 70 percent higher than in 1999. The modest price increases they are predicting would make today’s houses more unaffordable, adding to the already huge supply of unsold units and forcing an even more severe adjustment in the future. Fortune, May 4, 2006

“America is more dependent on housing”
The economy in America is more dependent on housing than it has been in a half-century, as the sector fuels consumer spending and has accounted for nearly three-quarters of the nation’s job growth in the past five years.

As a result, economists worry that the housing slowdown that began late last year could hurt the broader economy more than past real estate downturns, although other parts of the economy appear to be accelerating. The Washington Post, April 6, 2006

“What would it take to make things really go off the rails?”
This won’t be a crash, but a soft landing for the real estate market, it appears. But that made us wonder: What would it take to make things really go off the rails?

We talked to a number of experts about hypothetical events that could send the U.S. real estate market into a skid, from highly unlikely scenarios such as a military confrontation with China, to the types of predicaments we have faced in recent years, like natural disasters and terrorist attacks. Turns out, there are lots of ways to hit the housing market. Forbes, March 17, 2006

Compiled by Tom Acitelli and Mikhail Boguslavsky


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