Vol 8 No. 11 - December 5, 2007

Employment is key to housing meltdown

By Louise Bolger
sun staff writer

Every year I wait for the white pelicans to return to Manatee County. I never know exactly when it will be – that one day I will look out over the water and see their snowy bodies and black tipped wings gliding by. Their return always represents a new season with cooler weather, as well as more visitors and part time residents to the area.

This year the day I first spotted the white pelicans was the same day the Bradenton Herald’s headline was Is Relief In Sight? accompanied by a graphic of a house. Since I figured the day wasn’t going to get much better than this, I was tempted to go back to bed, but as it turns out the "relief" the Herald was reporting was just a bit overblown.

Their report was based on the homes on the market this October in Manatee County compared to last October, and the number of homes on the market in March of this year compared to October of this year.

In October of last year there were 5,409 homes on the market, this October there were 5,362, a reduction of 47 properties, not exactly what I would call significant relief. However, compared to March of this year, October had 606 fewer homes on the market, certainly a better number, but before you breakout the champagne, think about the reasons why.

As we all know, March is the beginning of the end of our season. Second home owners are getting ready to leave for the summer, taking their properties off the market, and many full time residents, knowing that there will be fewer buyers around, also withdrew from the market. This combined with sellers who permanently withdrew to wait for a market turn around, and properties that actually did sell during this period probably accounts for the reduced number of listings.

I think it’s safe to assume that once our season is back in full swing after the holidays you can anticipate seeing a tick up in the number of properties on the market. I’m usually pretty positive about real estate, but I’m also realistic. Anyone reading this headline without digging into it could easily come away with an unrealistic view of what may be down the road.

And what exactly is down the road, probably another bad year of too many properties on the market and too few buyers. But according to a story I recently read about Sam Zell, a Chicago based real estate investor in Time magazine, the news is not all bad. When asked about the housing crisis his response was, "There will be a period of indigestion but no crisis, no meltdown in the housing market. That’s ridiculous." The basis for his position is that the key to housing is the employment rate. As long as the employment stays basically full, under 5.5 percent he feels there is no major crisis in the housing market.

He goes on to say that individual investors who jumped into the market were all about greed, which they allowed to overcome their fear. This is a tough position to take, but as he points out, "Where is it written that every investor is entitled to flip at a profit?"

Mr. Zell’s comments make perfect sense to me, as long as people have jobs they will want to buy homes. Further, I do believe we are in a recovery, but I also believe we shouldn’t be lulled into thinking there still won’t be more pain because there will be.

With the oversupply of properties on the market for at least another year, serious sellers need to be both realistic and optimistic. The white pelicans come back every year and so will the buyers, it’s just the way of the world.

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