NATION Housing market strength surprises realty agents
Even as the rest of the economy faltered, the housing market has remained strong in many cities.
CHRISTIAN SCIENCE MONITOR
A husband and wife in Brookline, Mass., put their condominium on the market last month for the rarified amount of $495,000. Sure, it was a classic Boston brownstone. But it was also a first-floor residence that sits next to a college dormitory.
Within eight hours, the owners had three offers on the property -- all above the asking price. So they decided to take it off the market, wait three weeks, and then put it up again -- for $50,000 more.
From Miami to Denver to Los Angeles, it's like that these days: Houses have become bank vaults.
Even as the rest of the economy was faltering, the housing market remained strong in many parts of the country, contributing to what has now become one of the biggest real estate booms in the postwar era.
"I've never seen a market like this, not in 26 years in the business," says Alana Lasover, a Realtor in Washington.
What's next? The question now is: Will rising interest rates finally slow the sale and price escalation of homes? In some areas, of course -- notably Seattle and Portland, Ore. -- the market has already weakened. But many other parts of the country continue to defy gravity, and Realtors say the numbers have to come down at some point, don't they?
"They bounce around month-to-month," says Donald Straszheim, president of Straszheim Global Advisors, an investment firm in Los Angeles. "But when we look back at this 12 or 24 months from now, we'll say the end of 2001 and beginning of 2002 was a peak."
Still, no one is ready to say, unequivocally, that the boom might be over. For one thing, the real estate market is notoriously fickle and regional, so even if the sales slow in one area, prices and new home construction are likely to keep going in many others.
In fact, many economists expect activity to stay strong despite interest rates. That's in part because any increase in the cost of borrowing -- provided rates stay below 10 percent -- will likely be counteracted by improvements in employment and income growth as the economy turns around.
Hottest areas: Washington, Chicago, Los Angeles and Las Vegas are among the hottest markets at the moment. That's great news for people wanting to sell, but the bidding wars and lightning-quick sales can be anxious -- and costly -- moments for buyers.
"People are giving up appraisals, giving up rights to financing contingencies, putting themselves in harm's way," says Ms. Lasover, manager of Coldwell Banker Pardoe's offices in Potomac and Bethesda, Md.
In many cities, she says the upper-bracket market -- houses over $800,000 -- is soft, but anything under that goes quickly.
Why the housing market has stayed so strong, despite the recession and the terrorist attacks, remains an enigma to many experts.
"Sometimes people panic when friends and neighbors get laid off, and they think they'll be next," says Edwin Mills, a long-time real-estate professor at Northwestern University in Evanston, Ill. "That just hasn't happened this time. In a sense, it's a bit of a mystery."
Low mortgage rates, which recently edged back up over 7 percent, are certainly a primary driver. Lawrence Yun, an economist at NAR, says a study his group did found that a 1 percent drop in interest rates translated into 3 million additional households who qualified to buy a home.
Yet other forces are driving the market as well -- including a more sophisticated house-financing system and the unusualness of the recent recession.
Unemployment, currently at 5.5 percent, never rose to the peaks that it has in past downturns. It also hit businesses more than individuals.