IN THIS ISSUE
· ON THE BUBBLE
· SIDE TRIP
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THERE ARE THREE THINGS THAT A LEADER CAN DO WHEN ASKED TO MAKE A DECISION: (1) THE BEST THING IS TO MAKE THE RIGHT DECISION (2) THE SECOND BEST THING IS TO MAKE THE WRONG DECISION (3) THE WORST THING IS TO DO NOTHING.
A couple of months ago I was
watching “Good Morning America” while getting ready to go to work and
was stopped in my tracks by a story on how the real estate bubble was
going to burst nationwide. I usually give very little credence to any
network news story in the months preceding our national elections, but
this subject certainly caught my interest. Last May I attended a three
day conference in Washington, DC sponsored by the National Association
of Realtors. One of the featured speakers was Dr. David Lareah, chief
economist for the National Assoc. When you consider that NAR is the
largest trade association in the country (1.1 million members) as
well as the largest political lobby in the nation, then you must
rightfully conclude that Dr. Lareah is one of the top economists in the
country as well. He says that the real estate “boom” we have experienced
since 1990 will continue for another 10 years. I have attended three
more of his lectures this fall just to see if he has changed his story.
Where is Good Morning America getting its information, you ask? Here is what Dr Lareah has to say. Wall Street investment bankers are putting out the story through their media outlets like THE WALL STRREET JOURNAL and THE NEW YORK TIMES. Their motive is to steer funds away from the housing market and into the stock market. For the first time in our history Americans have more money invested in the equity in their homes than they have invested in the stock market. 9/11 had a major influence on this trend as the stock market suddenly looked very vulnerable and volatile while the ever consistent housing market continued steady growth. Now you know why they are motivated to talk trash about the real estate market. But what is real estate going to do over the next ten years? It’s time you heard “the rest of the story”.
First, let’s define some terms and set some starting points. Lareah defines a “boom” as a period of healthy real estate expansion. Historically booms have happened every other generation. Conversely, Dr.Lareah says a “bubble burst” is when the average price of real estate in an area, region or nation falls 50%. It normally take fives years to recover from such a drop. In 1991-92 there were around 3 million houses sold and 500 billion dollars worth of loan originations. In 2004 houses sold will reach a record 6.5 million and loan originations will top the 4 trillion dollar mark. There were modest backslides in 1994 and 2000 but the overall upward trend has been tremendous. Americans spend 30-40% of their household income on housing and related items. It is this constant spending on housing that Dr. Lareah credits for keeping us out of a recession, especially after 9/11.Where are the highs and lows you ask? This past year housing prices in Las Vegas went up 52% while Syracuse, NY had only a 1% growth rate. The medium price of a house is $650,000 in Anaheim, CA and $260,000 in the deserts of Las Vegas. Around here the medium price is around $215,000. Forty-nine metro areas in the US had double digit house price inflation this year. The Triangle area has had an average price growth rate this year between 4 and 5 per cent. This rate along with a steady annual increase in sales (3-4%) gives us what he describes as a good balance.
Richard Childress, NASCAR owner (Dale Earnhardt used to drive for Richard), has built what is now North Carolina’s largest winery at the intersection of US 52 and US 64 near Lexington. Wine tours and tastings are available in this spectacular Tuscan designed winery. It is only ninety minutes south on I-85 and it is one half mile from the world’s best bar-be-que at Lexington Bar-B-Q No. 1.