About the crane operator who flipped condos....
Real estate investors have speculated and flipped for centuries. It's a nice gig if you know how to do it--and right now these professionals are hoping fervently that real estate will crash so they can scoop it up and rent it out, or sell it back to us at higher prices later.
However, the last time I met any real, live, average home buyers who bought with a view toward flipping their home in six months to a year was a decade ago. That was during the homebuying speculative bubble of a lifetime--this was also a nice gig while the opportunity lasted, which wasn't long.
The story below contains some interesting comments about the housing market:
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Consumer Sentiment Improves Slightly
New-Home Sales Down, Big Layoffs Recorded
By John M. Berry and Daniela Deane
Washington Post Staff Writers
Saturday, October 27, 2001; Page E01
Consumer sentiment improved only slightly this month after a sharp decline in September, and while Americans expect the economy to get better next year, they do not expect a quick return to "good times," according to the University of Michigan's monthly sentiment survey released yesterday.
The university's sentiment index rose to 82.7 this month, from 81.8 last month, as expectations for what economic conditions will be like a year from now improved to a reading of 75.5 from September's 73.5. However, consumers' assessment of current conditions declined further, to 94.0 from 94.6.
"While consumers expected the pace of growth to improve after the start of 2002, the majority did not anticipate that the pace would be sufficiently strong to restore good times," said Richard Curtin, director of the survey. However, he said, "consumers anticipated record low inflation during the year ahead and viewed the zero interest rates offered by vehicle manufacturers [on sales this month] as a deal too good to miss."
Also yesterday, the Commerce Department said sales of new homes last month fell 1.4 percent, to an annual rate of 864,000, a much smaller decline after the Sept. 11 terrorist attacks than many analysts had expected. A new-home sale is recorded when a buyer makes a deposit on a new home or signs a sales agreement, rather than when the house is delivered, so the small decline suggests that buyers were not scared off by the attacks, analysts said.
However, the overall weakness in the economy before and after the attacks was underscored by a surge in layoffs reported by the Labor Department. In September, the department said, there were 1,316 instances of layoffs involving 50 or more workers, 41 percent more than in the same month last year. September's figure was the largest since the department began making such reports in April 1995.
California, which has the largest labor force of any state, reported the most initial claims for unemployment benefits after a mass layoff action, 54,267. The second-highest number of initial claims related to mass layoffs was 10,762 in neighboring Nevada, mostly in the hotel industry.
Consumer sentiment was high until last December, when it became evident that U.S. economic growth had slowed significantly. The monthly sentiment reading fell from 107.6 in November to a low of 88.4 in April. It rose rose to the low 90s before dropping further to 81.8 in September.
The Michigan survey is closely followed by economists for clues to the likely course of consumer spending, which accounts for about two-thirds of the nation's economic activity. The link is not particularly strong from month to month, and many analysts believe that small changes in the level of sentiment are difficult to interpret.
Large movements such as what has occurred since the autumn of 2000 usually are reflected broadly in consumer spending behavior, and that has been the case this year. Consumer spending had continued to rise this year, but at a much slower pace than in the past several years. Last month, though, spending fell very sharply, largely because of the attacks.
This month's Michigan survey found consumers expecting that inflation would be down to just a 1 percent rate a year from now, far less than the 2.8 percent that had been expected in September. The five-year inflation rate was expected to be 2.7 percent, slightly less than in September.
David Berson, chief economist at secondary-mortgage giant Fannie Mae, said the decline in new-home sales was "less than we thought it would be." He said Fannie Mae was looking for a September decline of about twice what it turned out to be.
"The numbers are weaker, but they're not indicative of a housing market that's falling to pieces," Berson said. "While the economy is in recession, housing is not." Berson said the main reason housing remained relatively strong was low mortgage rates. Average 30-year fixed-rate mortgages ended the week at 6.64 percent.
Executives at Hovnanian Enterprises Inc., the second-largest builder in the metropolitan area, which sells here under the name Washington Homes, said sales were flat in September compared with August, but that the company was still optimistic about the new-home market. Sales in the New York area, including northern New Jersey, were the most affected by the attacks, they said. The company is the biggest builder in New Jersey.
"Barring another major event, we've very confident that any downturn in the economy will affect housing very little," said Tom Pellerito, president of Hovnanian's Southeast division. "Interest rates are low, builder inventories are low, builders are well capitalized, demand far outstrips supply and there's very little available land to develop."
The September new-home sales decline was modest compared with the drop in existing-home sales for the month, which fell 11.7 percent. That was the biggest one-month decline in six years, according to the National Association of Realtors.
© 2001 The Washington Post Company |
