Friday October 13, 6:07 pm Eastern Time
Stocks be damned! Order me a million dollar home
By Richard Leong
NEW YORK, Oct 13 (Reuters) - Ed Abelite, a real estate developer in California, remains calm. While stock traders on the other side of the country have been whipped in a brutal sell-off over the past month, requests for his custom-built million dollar homes keep pouring in.
No panicked phone calls have come to Abelite's San Jose office, and his building schedule remains fully booked well into next year. ``There was no adverse reaction,'' he said.
With the tightest jobs market in 30 years, Wall Street analysts say consumers have plenty of money in their pockets and have not yet scaled back their free-spending ways.
``It takes a while for consumers to react,'' said Jan Hatzius, economist at Goldman Sachs Group Inc. ``They don't take any stock move as permanent.''
Certainly, a major slice of individual wealth has been wiped out. The technology-heavy Nasdaq composite index (^IXIC - news) is off 21 percent since the beginning of September, and a gruesome 35 percent from its March record high of 5,132.
The old-economy Dow Jones industrials average also is suffering, down 10 percent since early September, and off 13.3 percent from its January record high of 11,750.
JUST NUMBERS
But Abelite hasn't felt the bite. ``They are just numbers to me,'' he said.
While Abelite and Wall Street economists expect homebuyers and consumers to moderate their spending if the stock market continues to sag, they do not expect them to zip up their wallets and pack away their credit cards any time soon.
Take a look at Friday's retail report. The government said that consumer spending rose 0.9 percent in September, a bounce up from the slim 0.1 percent rise in August. And consumer confidence remains near record highs.
If consumers aren't shying away much from big-ticket items like homes, economists predict that even with the recent stock market swoon the holiday season wish lists will not shrink much either. They point to the spring-time stock slump, which scarcely dented consumer spending either.
``We are going to have a decent Christmas,'' said William Ford, senior economic advisor for check acceptance company TeleCheck Services Inc.
Ford, former president of the Federal Reserve Bank of Atlanta from 1980 to 1984, said while more U.S. families than ever hold stocks and have become wealthier from the stock market boom, it is job security as well as income growth which determine their level of spending.
``For most middle-income families, it's most important for them to say, 'Whether I have a job or not?','' Ford said.
HOT CALIFORNIA
According to Abelite, wealth created by the longest running stock bull market in U.S. history is very much in evidence in northern California, the hottest real estate market in the country and where Silicon Valley is situated.
A recent survey by the Federal Housing Finance Board showed that the average price of a home in San Francisco came close to the $400,000 mark, twice the national average.
Even as high-tech stocks have floundered in recent weeks, the region's housing backlogs and demand have not slacked off.
``We don't have enough products to house people in northern California. There is no relief in sight. There is not enough affordable or million-dollar homes,'' Abelite said, adding that there are plenty of homebuyers in the region that could pay all cash for a home.
For the entire country, though, housing activity has cooled in part from the Federal Reserve's campaign since June 1999 to hike interest rates to slow the economy and ward off inflation.
But the slowdown has been gradual. New home sales were down in August by 2.3 percent from year ago levels to an annualized rate of 893,000 units compared with 914,000 annual units in August 1999.
Construction of new homes and apartment buildings also are down nationally, to an annualized rate of 1.531 million units in July off 7.6 percent from a year earlier. |
