Pop Goes the Bubble?
Signs are growing that the era of 20%-30% annual housing price gains may be ending, with a decline of 5% or more in the median asking price over the last four months reported in Boston, Cleveland, Los Angeles, Miami, Phoenix and Washington, D.C., according to blogger Ben Engebreth’s Housing Tracker Web site, which posts weekly data on 49 cities. Stuart Gabriel of the University of Southern California’s Lusk Center for Real Estate says that the Fed’s interest rate hikes over the past year and a half have forced up adjustable rate mortgages, creating more buyer resistance to higher home prices. The drop in housing demand “seems to be real this time,” says Wellesley College economist Karl Case. “Housing on the coasts has gotten too expensive, mortgage rates are headed up and people have gotten spooked by the bubble talk. There just aren’t a lot of good arguments that real estate will continue to boom.” However, demographic forces continue to be favorable for real estate and local job markets remain healthy in most major metro areas, notes NAHB Chief Economist David Seiders. “Local home price booms are generally followed by a pretty orderly simmer-down unless there’s some serious economic downturn, and I don’t think we are anywhere near the next recession.” (www.money.cnn.com)
Money (2/1/06); Cybele Weisser, Sarah Max
[Return to top]
Overseas Real Estate Boom Lures Asian-American Buyers
Finding property prices in California prohibitively expensive, many Asian-American immigrants are making cheaper investments in their homeland real estate. Foreign developers are marketing directly to eager buyers through California mortgage brokers. Bay Area ethnic newspapers and radio stations now advertise real estate projects in China, the Philippines, Viet Nam and across the Pacific. Once the domain of deep-pocket institutional investors, international real estate markets have opened to small investors through globalization. The profits, as well as the risks, can be huge. One million homes are now under construction in the city of Shanghai, where $80,000 can buy a luxury condominium. (www.mercurynews.com)
San Jose Mercury News (1/19/06); K. Oanh Ha
[Return to top]
Contractors Cut Prices as Remodeling Boom Slows
Reflecting a recent slowdown in spending on home remodeling, which rose 4.3% last year, compared to nearly 20% in 2004, some contractors are offering perks and discounts to their clients for the first time in years. For consumers, the slowdown means that “they are going to get contractors who return phone calls, and they are going to be able to get two or three bids, instead of just one,” says Kermit Baker, a senior research fellow at Harvard University’s Joint Center for Housing Studies. Vince Butler, chairman of the NAHB Remodelors™ Council, notes that the softening is in the Midwest and pockets of the South and Northeast, but that business is still booming in most coastal areas and the West. William Owens, of Owens Construction in Powell, Ohio, sends fruit baskets to clients around Christmas and plans to start doing one-year anniversary follow-up visits to make sure the customer is satisfied. During the recent holiday season, Don Novak, of Novak Construction in Cedar Rapids, Iowa, gave most of his clients gift certificates to local restaurants. He has also been offering prices on items such as light fixtures for just 10% above their wholesale value, instead of the usual 35% markup. (www.wsj.com)
Wall Street Journal (1/19/06); Sara Schaefer Munoz
[Return to top]
Builders Bet on Mexico — Will U.S. Baby Boomers Cross the Border to Retire?
According to a study conducted by Cemex SA, a Mexican cement giant, and Active Living International, which builds retirement and active-adult communities, about 1 million Americans currently live in Mexico, including 157,000 active adults age 55 or over. That segment is expected to grow, according to the study. “Mexico is a growing opportunity for resort and retirement communities,” says Rita Feinberg, who heads NAHB’s international efforts. Mexico may also provide opportunities for small developers to escape increasingly aggressive competition form the biggest U.S. builders. “It might be easier and more efficient for our smaller builders to go to Mexico,” says Jerry Howard, NAHB’s executive vice president. Teaming up with FONATUR, Mexico’s tourism development agency, Scottsdale, Ariz.-based Loreto Bay is developing a seaside town in Baja California, with plans for 6,000 units ranging from $280,000 condos to $1 million custom-built beach homes. The company has taken orders for 554 homes and has 200 under construction. Most of the buyers are Americans and Canadians, according to James Grogan, the president and chief executive of the small firm. (www.wsj.com)
Wall Street Journal (1/18/06); Kemba J. Dunham
[Return to top]
As Economy Thrived Under Greenspan, So Did Debt
As chairman of the Federal Reserve for the past 18 years, Alan Greenspan has watched over an economy that has thrived in the face of stock market crashes, international financial crises, terrorist attacks and other shocks. But when he leaves office on Jan. 31, he will leave a nation that has rung up record household debt and a record trade gap, for which many analysts believe his low interest rate policies are responsible. When questioned on Capitol Hill in June about criticism that the Fed’s interest-rate cutting strategy during the early years of the decade had helped inflate a housing bubble by driving down mortgage rates and encouraging home owners to refinance and tap some of their equity, Greenspan suggested that imbalances such as households spending more than their income in the last year’s second and third quarters were an acceptable price for avoiding another depression or a Japanese-like economic stagnation. “We knew that in the process of what we were doing — that is, addressing the consequence of a very severe deflation of a [stock] bubble — carried with it potential side effects,” he said. “As best we can judge, things have turned out reasonably as we had expected, both positively and negatively, but in our judgment, the positive effects of the policy far exceeded the negative ones.” (www.washingtonpost.com)
Washington Post (1/23/06); Nell Henderson
[Return to top]
Boomers’ Choices May Prove Surprising
Researching what the nation’s 70 million baby boomers are likely to decide about housing as they go into their retirement years, Oxford, Miss.-based ProMatura Group LLC found that more than 50% of all home owners 45 to 54 years old and nearly 60% of those 55 to 64 said they were likely or very likely to buy a vacation, investment or new primary home sometime in the coming 50 months. Roughly 49% of owners 55 years and older said they are likely to move into some form of active adult housing. One out of five boomer households said they were thinking about moving to an age-restricted adult community — more than double what a similar study found just five years ago. The study was conducted in 2004 among 2,309 boomers. Unlike their immediate predecessors, boomers will consider communities that emphasize adult lifestyles, fitness and social interactions, according to Margaret Wylde, the company’s president and chief executive. About a quarter of the group said they wanted to end up living on, or with a view of, a body of fresh water such as a lake or river, compared to the 1.7% and 6.8%, respectively, who have their eye on buying property on the ocean or with a view of salt water. Just 1.7% of those 55 or older said they were likely to buy a home on a golf course. (www.washingtonpost.com)
Washington Post 1/21/06); Kenneth R. Harney
[Return to top]
|
