Will Main Street Follow Wall Street?
Carr, M. Anthony, The Washington Times (Washington, DC)
The past couple weeks of a volatile stock market may have you worrying about what this new economy will do to the real estate market.
For the immediate future, probably not much. Housing inventory continues to wane, while demand keeps heading up. Even with a dip in the number of home sales, the National Association of Realtors (NAR) reports 2000 will still fall into the top 10 category as far as markets go.
Multiple-contract offers have followed the low inventory, forcing prices up a bit. But Frederick E. Flick, vice president of economic research at NAR, writes, "That's great for sellers, but tough on buyers and buyer agents." Mr. Flick wrote a commentary for NAR's Real Estate Outlook, a market trends publication for the association's members.
But just hold on for the "supply response," he continues. Since homeowners are seeing some of the highest prices ever bid, more should be putting their homes on the block soon.
The fear of inflation keeps peeking over the horizon these days, and that could slow the economy a bit, he says. Couple that with potential higher interest rates and you do have a recipe for a slowdown in the real estate market. Nevertheless, the inventory is the key factor in the Washington area. The local economy keeps surging ahead, which should maintain pressure on housing demand.
Amazingly, Mr. Flick pretty much forecasts what would happen during the past couple of weeks on Wall Street. (His article was written for the April issue, meaning it was written weeks earlier.)
He states that much of the spending this past decade has been attributed to the wealth created by the great bull market of the 1990s, whether actual or perceived.
"The Fed's policy to raise the level of interest rates is gradually slowing the real estate business, as well as causing the ups and downs in the stock market. So a direct impact of increasing interest rates is to hurt businesses that depend on credit," he says.
"But an indirect effect will be to depress the values of stocks [and bonds] and therefore also affect the demand for housing," he says.
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