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Housing market's shaky ground
By JEFF HARRINGTON
© St. Petersburg Times, Over the past year, the country's housing market has been amazingly resilient in propping up the economy. Tech stock meltdowns, surging gas prices . . . No problem. But can it hold up in this new climate created by terrorism, when layoffs in the airline and tourism industry are rising, the markets are roiling, and buyers are reluctant to make big purchases? Suddenly, the housing industry is feeling vulnerable for the first time in a long time. "Like everything else, this bright spot in the American economy has been eclipsed by the events of Sept. 11," said David Lereah, chief economist of the National Association of Realtors. "Our internal tracking shows a downturn following the attack on America, and there will be some natural pullback." Lereah's prediction for existing-home sales in 2001: 5.19-million, a tepid 1.3 percent increase over 2000. Hard numbers on September home sales won't be available for weeks, but the results seem to be mixed in the Tampa Bay area so far. "Some people say sales have slowed considerably, if not stopped, and others say they had a decent week last week," said Marvin Rose, founder of Rose Residential Reports, which tracks the area housing market. "I don't think anybody had a good week the week before last." Like most businesses, many Realtors, home builders and appraisers were paralyzed for at least a day or two after the Sept. 11 terrorist attacks. Then the Federal Reserve cut interest rates for the eighth time this year, a half-point cut on Sept. 17, the day the stock market reopened. Realtors and title companies almost immediately reported a jump in home refinancings as homeowners rushed to save money and pay off higher-interest debt. At Lawyers Title on Enterprise Road in Clearwater, escrow manager Barbara Bylski estimates that refinancings are up 25 percent so far this month over August. The bad news for the real estate business: She said that offset a 25 percent drop on the new mortgage side of the business. Some expect mortgage rates, already fluctuating near historic lows, to fall further as the full impact of the Fed cuts takes hold. Fixed-rate 30-year mortgages are currently being advertised at less than 6.5 percent. But whether the cuts will do as much for home sales as refinancings remains to be seen. Low mortgage rates haven't been enough to overcome slumps in some markets. In the Dallas-Fort Worth area, for example, home builders report a drop in demand for houses in the $200,000-plus range, blaming the stock market turmoil. The diverse mix of the Tampa Bay region makes it harder to predict an impact. A large base of retirees, along with MacDill Air Force Base and a scattering of defense companies, should help. The region's heavy reliance on tourism and travel won't. There is some solace that the housing industry headed into the week of the attacks on an up note. The National Association of Realtors reported Tuesday that sales of existing homes rose 5.8 percent from July to a seasonally adjusted annual rate of 5.5-million in August, an all-time monthly high. It eclipsed the previous record of 5.45-million set in June 1999 when the economy was booming. Looking ahead, Carol Austin, executive director of the Greater Tampa Association of Realtors, said she is still trying to assess whether low rates are enough to offset the economic fears of would-be buyers. But association president Mary McCall holds no such reservations. "We've absolutely seen no slacking off," she said. "We're not seeing anything other than people saying, 'I'm not going to cave in.' Everything is positive right now." Backing up her optimism: Rick Smith, president of Stewart Title of Tampa, said many mortgage lenders are handling as much volume as they can. He anticipates a good year despite the turmoil and maybe even because of it. Investors taking money out of the stock market are looking for safe havens, he said, "and real estate is one of the most stable things out there." Terrabrook, developer of the Westchase community in northwest Tampa, cited a steady stream of home buyers and browsers. The developer, which averages four or five Westchase sales a week, said it signed eight contracts the week of the terrorist attacks and four contracts the next week. "Home buyers and home shoppers took a hit like every other segment of the economy, but I think people now are over the initial shock," Terrabrook spokesman John Heagney said. "It seems as if people are resuming their normal schedules." Local home builders such as Westfield Homes and JMC Communities are not pulling back on any speculative construction. "There really hasn't been any kind of negative," said Steve McAuliffe, a JMC executive and immediate past president of the Contractors & Builders Association of Pinellas County. Westfield, the top builder in Hillsborough County last year, said sales have not slowed since Sept. 11 and it is on track to close about 625 homes this year, up 10 percent to 15 percent from 2000. Still, Westfield vice president David Pelletz wants to watch the next 30 days closely before placing bets. If there is another terrorist strike in the United States, he wouldn't be surprised to see business suddenly drop 50 percent. The national Realtors association forecasts the economy will contract by 0.6 percent in the current quarter and by 0.2 percent in the fourth quarter. But it predicts recovery next year, with a 3.4 percent growth rate by the second quarter of 2002. Michael Slater, president of Triad Research & Consulting Inc., a real estate research and consulting company based in Tampa, sees one positive fallout in a market he tracks closely: new apartments. He reasons that any more people may be holding off on home purchases, perhaps staying in apartments until tension around the world eases. "People are not going to make long-term commitments on home buying, and yet they need shelter," Slater said. "The transiency of multifamily housing will serve all niches." - Times wires contributed to this report. Jeff Harrington can be reached at harrington@sptimes.com or (813) 226-3407.
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From the Times Business report
From the AP
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