Investment propertyHome Builders Predict Slower Sales
A preliminary reading of responses to a recent National Association of Home Builders survey indicates that the Sept. 11th terrorist attack has exacted a heavy toll on housing producers throughout the country. And it could get worse before it gets better.
Thirty-five percent of the first 78 responses tabulated by the NAHB said sales have declined by more than 10 percent since thousands of Americans were killed at the World Trade Center, Pentagon, and Pennsylvania crash site. And 20 percent more of the builders polled said sales are off between 5 and 10 percent. Only a third have seen no change.
The survey, which was taken before the bombing began in Afghanistan this weekend, also found that three out of four builders have recorded a decline traffic and 28 percent have seen more cancellations than normal since four planes were hijacked and crashed by extremists.
Gopal Ahluwalia, NAHB"s research chief, said traffic is down 20 percent from pre-911 levels. He said most builders believe that because of the relatively low level of mortgage rates, people are not likely to put off plans to buy new houses as long as they feel their jobs are safe.
Said Valerie Dolenga, a spokesperson for Pulte Home Corp., one of the nation"s largest builders:
"The first week of the tragedy, the sale of everything fell off significantly, except maybe batteries, bottled water, dehydrated food stuffs and weapons. People were scared, sad and locked to their televisions, radios and computers looking for answers. By the end of the week, however, they started moving forward again...We are seeing strong traffic once again in our communities."
But Ahluwalia has a different, more pessimistic take. "My feeling is that consumer confidence is so low that sales will be off significantly," he said.
The preliminary results of the survey were presented Friday to members of the NAHB High Production Builders Council, which was meeting in Ellicot City, Md.
Only a week earlier, David Seiders, NAHB"s Chief Economist, said the "heaviest impact" of the terrorist attacks should be felt in the fourth quarter, when housing starts will be 13 percent less from previous forecasts. But while 137,000 houses won"t be built that otherwise would have, he said most of the "lost" production will be made up in 2003 or beyond.
Indeed, for "03, Seiders has raised his starts forecast by 50,000 units to a "hearty" 1.684 million.
The impact of the attacks doesn"t seem to have hit the resale sector has hard. According to the National Association of Realtors, there was almost a total halt in activity in the first few days after the disaster. But by the weekend, traffic was back up to within 80 percent of normal in New York and Washington and 90 percent elsewhere.
Now, says NAR"s Chief Economist, David Lereah, there are fewer tire kickers who need something to do during football season. But there also are more serious buyers afoot.
"People who lost their jobs are out of the market, and that could hurt us down the road," he said. "But if you have job security, it"s a buyer"s market," especially now that mortgage rates are at their lowest level in three years, he said.
Lereah also pointed out that real estate is once again "a superior investment" to stocks. "Real estate has outperformed stocks over the last two years, and the volatility in real estate is far less," he said.
"There"s never been a year since 1968 when prices have dropped. Maybe from one quarter to another, but never year-over-year."
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