Entering The New Year With A Head Of Steam
Expect continued economic strength in 2006, unless the housing or oil markets jump the rails In investing, just knowing the right questions to ask can go a long way toward helping you get the most out of your portfolio. That's especially true when your returns are hostage to the uncertain twists of the economy. To help you understand the crucial issues in the investment climate for 2006, BusinessWeek addresses six key questions on the economic outlook. We have plenty of help from our panel of 54 forecasters in our annual outlook survey (table, page 74). On average, they expect the economy to grow 3.3% from the end of 2005 to the end of 2006. That's a shade slower than the expected 3.7% pace for 2005, with growth progressively cooling in each quarter. Profit growth will slow to a pace of 7.3%, and inflation will fall as oil prices slip below $55 per barrel. The Federal Reserve will lift its target rate to 4.75% by spring, from 4% now, and the yield on a 10-year Treasury note will drift up to 5%, from about 4.5%. The jobless rate should edge down to 4.9%, from 5%.On balance, not a bad scenario, assuming all of this comes to pass. Now the urgent questions that both investors and economists are wrestling with:1. Is the economy more likely to be stronger or weaker than the survey consensus?The better bet is on the strong side. A slight majority (55%) of the forecasters expect the economy to grow more than the 3.3% average projection. While consumer spending and housing will weaken, strength in capital spending, inventory rebuilding, post-Katrina government outlays, and exports will take up the slack. "Fueling growth will be businesses flush with cash and pristine balance sheets putting their [money] to work investing and hiring," says Mark Zandi at Moody's Economy.com (MCO ).Many of the pessimists expect this general trend, too. But they also anticipate a sizable hit to consumer spending from the predicted housing slowdown. One problem with that scenario, though, is that few forecasters expect the yield on 10-year Treasuries to rise much above 5%, a level translating to 30-year mortgage rates of about 6.5%. Such rates may slow housing activity, but they will not precipitate a collapse.Moreover, stronger growth overseas will be a plus. "Export growth should be solid in the coming year as major economies abroad retain forward momentum," says Keith Hembre at First American Funds. That trend, along with slower import growth, should stabilize or perhaps narrow the trade deficit.2. How high will the Fed have to push interest rates in order to contain inflation?No other question is more important to broad investment decisions than this one. The answer will depend on the strength of the economy and how that affects wages and inflation expectations. The fact that 38% of the forecasters expect the federal funds rate to hit 5% or more suggests a concern that the Fed may tighten more than the consensus expects.Watch core inflation, which excludes energy and food. Energy prices only have to stabilize at current levels for overall inflation to decline next year. However, most economists expect at least moderate upward pressure on core inflation. If the economy remains as strong as it is now, more companies will pass along current higher costs for energy and labor to their customers. "Pricing power appears to have improved significantly in recent quarters," says John Ryding at Bear Stearns Cos. (BSC ). "Coupled with higher costs, we believe this will lead to higher inflation, which will keep the Fed raising rates through spring 2006."Don't expect a surge in either core inflation or interest rates. The anti-inflation forces of strong productivity and global competition are still at work. Even a 5% fed funds rate is far from draconian.3. The housing bubble: Slow leak or pop?The view of most economists, including Fed Chairman Alan Greenspan, is that a national home-price bust is highly unlikely. Clearly, many local markets, mainly on the coasts, are overvalued and will face price declines as interest rates rise.Still, housing presents the Fed with a delicate balancing act. Rising home values and the cash consumers have extracted from their home equity via refinancing and home-equity loans have fueled both consumer spending and the economy. So the less housing slows, the stronger the economy, and the greater the need for the Fed to raise rates. But overtightening policy could severely damage housing, and possibly the overall economy.Where do rising mortgage rates fit in? They would have to increase far more than expected to hammer housing. In the past, 30-year fixed rates have approached 8% before monthly payments began to disqualify large numbers of potential buyers. But there are new risks now: The rate level could be lower because of higher home prices. Also, JPMorgan Chase & Co. (JPM ) estimates that risky subprime loans make up close to 9% of mortgage debt, large enough to make a downturn worse if these loans begin to fail in large numbers. A high concentration of these loans makes California especially vulnerable.4. Will the profits boom continue for another year?The short answer is no. Profits in 2005 were surprisingly strong, even outside of energy. Through the third quarter, earnings growth for the Standard & Poor's 500 companies beat expectations for the 10th quarter in a row, according to Thomson Financial. "Pricing power is pretty good with profits at a record share of gross domestic product," says David Wyss at Standard & Poor's (MHP ). In 2006 earnings will grow more slowly but will remain well supported by consumer, business, and foreign demand.It is normal for earnings to slow as a business upswing gets older, partly because productivity gains diminish and labor costs creep up, squeezing margins. That pattern is likely to play out in 2006. Through the first three quarters of 2005, companies were still boosting their efficiency at a good, if slower, clip. To the extent those efforts continue in 2006 -- and the imperative from global competition suggests they will -- profits should post more modest but still healthy gains.5. What should investors expect from foreign economies?Growth prospects abroad have improved. "Euro-zone GDP growth will rise from about 1% to 2.5%-3% in 2006, China keeps doing 9%-plus, Japan is back for real, and emerging-market growth remains robust," says James Paulsen at Wells Capital Management.The two big updrafts will come from the euro zone and Japan, as reflected in the new attitudes of both central banks. The European Central Bank lifted interest rates on Dec. 1 for the first time in five years, and the Bank of Japan is laying the groundwork for ditching its zero-rate policy begun in 2001, now that its long battle with deflation is ending.Higher interest rates and faster growth abroad will increase the attractiveness of foreign-currency bonds and stocks relative to dollar-based assets. That's one reason economists expect downward pressure on the greenback to resume in 2006. But the U.S. should be able to attract the foreign capital it needs to finance its trade deficit without a dollar crash.6. What are the wild cards in the outlook that could shake up a portfolio's value?A sharp dropoff in housing activity and home prices may not be the expected scenario, but it is at the top of most forecasters' worry lists of what could go wrong in the economy in 2006. So is the price of oil. Its ups and downs could be either a positive or a negative for growth. Any sharp swing out of the range of $45 to $70 per barrel would affect growth and overall inflation.Fed policy is another prime concern, especially if the economy is stronger than expected, fueling more inflation pressures. Mickey Levy at Bank of America Corp. (BAC ) frets the Fed could overtighten, thereby slowing the economy sharply or creating financial trouble elsewhere in the world. There is also concern about how well soon-to-be Fed chief Ben S. Bernanke will get along with Wall Street. Financial pros think they have a good read on Bernanke, but he lacks the Street savvy of Greenspan. His Fed's behavior in an unexpected financial crisis may be the key test of his rapport with the markets.Throw in concerns about a possible plunge in the dollar, shrinking foreign capital inflows, and new acts of domestic terrorism, and you have enough in the mix to make any investor queasy. But if the forecasters are right about these six questions, a healthy economy should offer plenty of attractive opportunities to make money.
This article is reproduced in full from Business Week Online (12/05)
Saturday, December 31, 2005
Existing Homes Sales Summary for November 2005
Existing Homes Sales Summary
Summary
Source: National Association of Realtors By Kevin Thorpe, NAR Research
Next report on Existing Homes Sales due 1/25/06
Happy New Year!
Summary
- • Existing home sales fell 1.7% in November (seasonally adjusted annualized rate). A total of 6.97 million units exchanged hands during the month (single family plus condos and coops), which is the lowest sales pace since March.
- • Despite the decelerating sales trend, home prices continued to show strength. The median price rose 13.2% from a year ago period. The national median home price stood at $215,000.
- • The price gain was the strongest in the West, where price rose by 19%. The South region recorded slowest growth with 8% appreciation.
- • The inventory of homes for sale rose to 2.90 million. That is roughly 400,000 more homes on the market compared to one year ago. Consequently, the months supply of inventory based on the current sales pace rose to 5.0 months. The rising supply will undoubtedly mean a retreat in price growth to a more sustainable single-digit pace by the spring of 2006.
- • The average mortgages rate in November of 6.3% is 50 basis points higher than what had prevailed for most of 2005 and 2006. Higher rates are cutting into affordability and hence housing demand. Rates are further expected to inch higher in 2006.
- • Even with modestly higher rates home prices are in no danger of falling. Nationally, prices are projected to rise by 6% in 2006, which translates into about $12,000 housing equity gains for a typical homeowner in the U.S.
Source: National Association of Realtors By Kevin Thorpe, NAR Research
Next report on Existing Homes Sales due 1/25/06
Happy New Year!
Thursday, December 29, 2005
Take It From Japan, Bubbles Hurt
Take It From Japan: Bubbles Hurt
This is a really interesting article from the New York Times which talks about buying in a “bubble” market and the effect it can have on properties and investments.
"Japan shows the importance of avoiding a hard landing,…avoid big shocks. That is the biggest lesson of Japan's bubble."
- Jim
(image placeholder)
Ko Sasaki for The New York Times
Yoshihisa Nakashima in front of his condominium building in the suburb of Kashiwa, far from his government job in Tokyo. His apartment is worth half of what he paid 14 years ago, during the real estate bubble.
By MARTIN FACKLER
Published: December 25, 2005
KASHIWA, Japan
FOURTEEN years ago, Yoshihisa Nakashima looked at this sleepy suburb an hour and 20 minutes from downtown Tokyo and saw all the trappings of middle-class Japanese bliss: cherry-tree-lined roads, a cozy community where neighbors greeted one another in the morning and schools within easy walking distance for his two daughters.
So Mr. Nakashima, a Tokyo city government employee who was then 36, took out a loan for almost the entire $400,000 price of a cramped four-bedroom apartment. With property values rising at double-digit rates, he would easily earn back the loan and then some when he decided to sell.
Or so he thought. Not long after he bought the apartment, Japan's property market collapsed. Today, the apartment is worth half what he paid. He said he would like to move closer to the city but cannot: the sale price would not cover the $300,000 he still owes the bank.
With housing prices in the United States looking wobbly after years of spectacular gains, it may be helpful to look at the last major economy to have a real estate bubble pop: Japan. What Americans see may scare them, but they may also learn ways to ease the pain.
To be sure, there are several major differences between Japan in the 1980's and the United States today. One is the fact that property prices rose much faster and more steeply in Japan, partly because speculators used paper profits from a booming stock market to invest in property, insupportably leveraging the prices of both higher and higher.
Another difference is that the biggest speculators in Japan's frenzy were deep-pocketed corporations, and they pumped up the commercial property market at the same time that home prices were inflating.
Still, for anyone wondering why even the possibility of a housing bubble in the United States preoccupies so many economists, it is worth looking at how the property crash in Japan helped to flatten that economy, which is second only to that of the United States, and to keep it on the canvas for more than a decade.
And as American homeowners contemplate what might happen if their property values fell -particularly if they fell hard - there are lessons in the bitter experiences of their Japanese counterparts like Mr. Nakashima.
JAPAN suffered one of the biggest property market collapses in modern history. At the market's peak in 1991, all the land in Japan, a country the size of California, was worth about $18 trillion, or almost four times the value of all property in the United States at the time.
Then came the crashes in both stocks and property, after the Japanese central bank moved too aggressively to raise interest rates. Both markets spiraled downward as investors sold stocks to cover losses in the land market, and vice versa, plunging prices into a 14-year trough, from which they are only now starting to recover.
Now the land in Japan is worth less than half its 1991 peak, while property in the United States has more than tripled in value, to about $17 trillion.
Homeowners were among the biggest victims of the Japanese real estate bubble. In Japan's six largest cities, residential prices dropped 64 percent from 1991 to last year. By most estimates, millions of homebuyers took substantial losses on the largest purchase of their lives.
Their experiences contain many warnings. One is to shun the sort of temptations that appear in red-hot real estate markets, particularly the use of risky or exotic loans to borrow beyond one's means. Another is to avoid property that may be hard to unload when the market cools.
Economists say Japan also contains lessons for United States policy makers, like Ben S. Bernanke, who is expected to become chairman of the Federal Reserve at the end of January. At the top of the list is to learn from the failure of Japan's central bank to slow the rise of the country's real estate and stock bubbles, and then its failure to soften their collapse. Only recently did Japan finally find ways to revive the real estate market, by using deregulation to spur new development.
Most of all, economists say, Japan's experience teaches the need to be skeptical of that fundamental myth behind all asset bubbles: that prices will keep rising forever. Like their United States counterparts today, too many Japanese homebuyers overextended their debt, buying property that cost more than they could rationally afford because they assumed that values would only rise. When prices dropped, many buyers were financially battered or even wiped out.
"The biggest lesson from Japan is not to fall into the same state of denial that existed here," said Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble.
"During a bubble, people don't believe that prices will fall," he said. "This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history."
In the 1980's, Professor Noguchi said, the frenzy in Japan reached such extremes that companies tried to outbid one another even for land of little or no use. At the peak, an empty three-square-meter parcel (about 32 square feet) in a corner of the Ginza shopping district in Tokyo sold for $600,000, even though it was too small to build on.
Plots only slightly larger gave birth to bizarre structures known as pencil buildings: tall, thin structures that often had just one small room per floor.
As a result, Japan's property market in the 1980's was much more fragile than America's today, Professor Noguchi said. And when the market fell, it fell hard. Because of all the corporate speculation, the collapse wiped out company balance sheets, crippled the nation's banks and gave the overall economy a blow to the chin.
Since 1991, Japan has spent 11 years sliding in and out of recession. It is only now showing meaningful signs of recovering, with the World Bank forecasting that Japan's economy will grow by a solid 2.2 percent this year
Despite the differences, Professor Noguchi said he also saw parallels between Japan then and America now. Last year, as a visiting professor at Stanford, he said he read real estate articles in local newspapers that sounded eerily familiar. Houses were routinely selling for $10 million or more, he said, with buyers saying they felt that they had no choice but to buy now, before prices rose even further.
"It was déjà vu," Professor Noguchi said. "People were in a rush to buy, and at extraordinary prices. I saw this same haste psychology in Japan" in the 1980's. "The classic definition of a bubble," he added, "is people buying on false expectations about future prices, and buying with the hope of selling in the future."
Economists and real estate experts see other parallels as well. In the 1980's, the expectation of rising real estate prices made many Japanese homebuyers feel comfortable about taking on huge debt. And they did so by using exotic loans that required little money upfront and that promised low monthly payments, at least for a short time.
A similar pattern is found today in the United States, where the methods include interest-only mortgages, which allow homebuyers to repay no principal for a few years. Japan had its own versions of these loans, including the so-called three-generation loan, a 90- or even 100-year mortgage that permitted buyers to spread payments out over their lifetimes and those of their children and grandchildren.
But when property prices dropped in Japan, homeowners found themselves saddled with loans far larger than the value of their real estate. Many fell into bankruptcy, especially those who lost their jobs or took pay cuts as declining property prices helped to incite a broader recession. From 1994 to 2003, the number of personal bankruptcies rose sixfold, to a record high of 242,357, according to the Japanese Supreme Court, which tracks such data.
Even many of those who avoided financial collapse found themselves marooned in homes that they never intended as lifelong residences. For many Japanese homebuyers in the 1980's, land prices had risen so high that the only places they could afford were far from central Tokyo. Many went deep into debt to buy tiny or shoddily built homes that were two hours away from their offices.
Now, after years of tumbling land prices have made Tokyo more affordable again, few people are shopping for homes in the distant suburbs. That has led to severe declines in property values in these outlying areas, leaving many people with homes that are worth less than the balance on their mortgages from a decade or more ago.
Mr. Nakashima, who bought the apartment here in Kashiwa, said it would take him at least another decade to whittle down his loan to the point that he could pay it off by selling his home. And this assumes that the apartment does not drop further in value - a real possibility, because lower prices in Tokyo have led to a recent boom in construction of newer apartments in neighborhoods closer to downtown.
"We can't sell and get something better because we'll take such a huge loss," said Mr. Nakashima, a serious man who recounts his story with careful precision, sometimes pausing to check dates. "The collapse of the bubble robbed us of our freedom to choose where we can live."
He rues the idea that homes came to be seen as just another investment. "Homes should be different from stocks," he said. "They shouldn't be the object of speculative investing. If home prices move too much, they can ruin your life."
Mr. Nakashima says he is resigned to spending the rest of his days in Kashiwa. It is peaceful here, after all, he said. There is also a bit of history: he pointed to two tree-covered mounds in a corner of the apartment complex that are said to contain the severed heads of samurai killed in a battle here five centuries ago.
Some economists say that there are probably millions of people like Mr. Nakashima, trying to make the best of life in homes that are distant from work and for which they grossly overpaid. "There is a whole generation of homebuyers stuck out in far suburbs," said Atsushi Nakajima, chief economist at the research arm of the Mizuho Financial Group in Tokyo. "It's sad, but Japan has basically forgotten about them, and is moving on. They are just left out there."
Mr. Nakajima said he had barely missed being stuck out there himself. In 1991, he was looking at a 100-square-meter apartment (1,080 square feet) for about $600,000 about two hours outside Tokyo. He said his wife stopped him. Six years later, he spent the same amount to buy a more spacious house in a downtown neighborhood. "Maybe my wife should be the economist," he said.
Now that Japan's real estate market is finally showing signs of recovering from the 1991 collapse, economists say it offers a lesson for Americans in how to end - and not to end - a long slide in property prices.
For years after the real estate bubble burst, the Japanese government tried to resuscitate the market and other parts of the economy with expensive public works projects, but they were so poorly planned that they succeeded only in inflating the national debt.
NOT until the late 1990's did the government try a new tack: deregulation. To kick-start the economy, Tokyo started loosening restrictions on the financial industry. While most of this effort was aimed at reviving the banking industry, it also allowed investors to create real estate investment trusts, essentially mutual funds that invest in commercial property. A few years later, the government also eased building codes, such as height limits, and cut approval times for building permits.
Economists and real estate executives credit these changes with bringing new money into the market, and with making redevelopment easier. The results are visible in a boom that is dotting the Tokyo skyline with cranes and new high-rises.
They are also visible in statistics. Residential home prices in Tokyo rose 0.5 percent in the 12 months through July, the first gain in 15 years, the government said in September. Nationwide, land prices are still down, but the pace of decline has slowed to a crawl, the government said.
"Deregulation revived the Tokyo land market," said Toshio Nagashima, executive vice president at Mitsubishi Estate, one of Japan's largest real estate companies. He said the changes were one reason that his company committed to spend $4.5 billion by 2007 to build six skyscrapers in the central Marunouchi financial district.
Japanese economists say the United States is not likely to suffer a decline that is as severe or long-lasting as Japan's, because they see a more skilled hand at the tiller of the American economy: the Federal Reserve. Japan's central bank, the Bank of Japan, failed to curb the stock and real estate bubbles until mid-1989, when it was too late and prices were sky-high, they said.
When it did take action, it moved faster and more drastically than Japan's overinflated land and stock markets could handle, raising its benchmark interest rate to 6 percent from 2.5 percent over 15 months. Economists say that this pulled the rug out from under both markets at the same time.
Akio Makabe, a finance professor at Shinshu University in Matsumoto, says the Fed has been more deft in handling the rise in America's property market, which he believes is definitely in a bubble. He praised the Fed for apparently learning from Japan's mistakes, tightening more gradually and taking the economy's pulse as it does so.
"Japan shows the importance of avoiding a hard landing," Professor Makabe said. "Avoid big shocks. That is the biggest lesson of Japan's bubble."
This is a really interesting article from the New York Times which talks about buying in a “bubble” market and the effect it can have on properties and investments.
"Japan shows the importance of avoiding a hard landing,…avoid big shocks. That is the biggest lesson of Japan's bubble."
- Jim
(image placeholder)
Ko Sasaki for The New York Times
Yoshihisa Nakashima in front of his condominium building in the suburb of Kashiwa, far from his government job in Tokyo. His apartment is worth half of what he paid 14 years ago, during the real estate bubble.
By MARTIN FACKLER
Published: December 25, 2005
KASHIWA, Japan
FOURTEEN years ago, Yoshihisa Nakashima looked at this sleepy suburb an hour and 20 minutes from downtown Tokyo and saw all the trappings of middle-class Japanese bliss: cherry-tree-lined roads, a cozy community where neighbors greeted one another in the morning and schools within easy walking distance for his two daughters.
So Mr. Nakashima, a Tokyo city government employee who was then 36, took out a loan for almost the entire $400,000 price of a cramped four-bedroom apartment. With property values rising at double-digit rates, he would easily earn back the loan and then some when he decided to sell.
Or so he thought. Not long after he bought the apartment, Japan's property market collapsed. Today, the apartment is worth half what he paid. He said he would like to move closer to the city but cannot: the sale price would not cover the $300,000 he still owes the bank.
With housing prices in the United States looking wobbly after years of spectacular gains, it may be helpful to look at the last major economy to have a real estate bubble pop: Japan. What Americans see may scare them, but they may also learn ways to ease the pain.
To be sure, there are several major differences between Japan in the 1980's and the United States today. One is the fact that property prices rose much faster and more steeply in Japan, partly because speculators used paper profits from a booming stock market to invest in property, insupportably leveraging the prices of both higher and higher.
Another difference is that the biggest speculators in Japan's frenzy were deep-pocketed corporations, and they pumped up the commercial property market at the same time that home prices were inflating.
Still, for anyone wondering why even the possibility of a housing bubble in the United States preoccupies so many economists, it is worth looking at how the property crash in Japan helped to flatten that economy, which is second only to that of the United States, and to keep it on the canvas for more than a decade.
And as American homeowners contemplate what might happen if their property values fell -particularly if they fell hard - there are lessons in the bitter experiences of their Japanese counterparts like Mr. Nakashima.
JAPAN suffered one of the biggest property market collapses in modern history. At the market's peak in 1991, all the land in Japan, a country the size of California, was worth about $18 trillion, or almost four times the value of all property in the United States at the time.
Then came the crashes in both stocks and property, after the Japanese central bank moved too aggressively to raise interest rates. Both markets spiraled downward as investors sold stocks to cover losses in the land market, and vice versa, plunging prices into a 14-year trough, from which they are only now starting to recover.
Now the land in Japan is worth less than half its 1991 peak, while property in the United States has more than tripled in value, to about $17 trillion.
Homeowners were among the biggest victims of the Japanese real estate bubble. In Japan's six largest cities, residential prices dropped 64 percent from 1991 to last year. By most estimates, millions of homebuyers took substantial losses on the largest purchase of their lives.
Their experiences contain many warnings. One is to shun the sort of temptations that appear in red-hot real estate markets, particularly the use of risky or exotic loans to borrow beyond one's means. Another is to avoid property that may be hard to unload when the market cools.
Economists say Japan also contains lessons for United States policy makers, like Ben S. Bernanke, who is expected to become chairman of the Federal Reserve at the end of January. At the top of the list is to learn from the failure of Japan's central bank to slow the rise of the country's real estate and stock bubbles, and then its failure to soften their collapse. Only recently did Japan finally find ways to revive the real estate market, by using deregulation to spur new development.
Most of all, economists say, Japan's experience teaches the need to be skeptical of that fundamental myth behind all asset bubbles: that prices will keep rising forever. Like their United States counterparts today, too many Japanese homebuyers overextended their debt, buying property that cost more than they could rationally afford because they assumed that values would only rise. When prices dropped, many buyers were financially battered or even wiped out.
"The biggest lesson from Japan is not to fall into the same state of denial that existed here," said Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble.
"During a bubble, people don't believe that prices will fall," he said. "This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history."
In the 1980's, Professor Noguchi said, the frenzy in Japan reached such extremes that companies tried to outbid one another even for land of little or no use. At the peak, an empty three-square-meter parcel (about 32 square feet) in a corner of the Ginza shopping district in Tokyo sold for $600,000, even though it was too small to build on.
Plots only slightly larger gave birth to bizarre structures known as pencil buildings: tall, thin structures that often had just one small room per floor.
As a result, Japan's property market in the 1980's was much more fragile than America's today, Professor Noguchi said. And when the market fell, it fell hard. Because of all the corporate speculation, the collapse wiped out company balance sheets, crippled the nation's banks and gave the overall economy a blow to the chin.
Since 1991, Japan has spent 11 years sliding in and out of recession. It is only now showing meaningful signs of recovering, with the World Bank forecasting that Japan's economy will grow by a solid 2.2 percent this year
Despite the differences, Professor Noguchi said he also saw parallels between Japan then and America now. Last year, as a visiting professor at Stanford, he said he read real estate articles in local newspapers that sounded eerily familiar. Houses were routinely selling for $10 million or more, he said, with buyers saying they felt that they had no choice but to buy now, before prices rose even further.
"It was déjà vu," Professor Noguchi said. "People were in a rush to buy, and at extraordinary prices. I saw this same haste psychology in Japan" in the 1980's. "The classic definition of a bubble," he added, "is people buying on false expectations about future prices, and buying with the hope of selling in the future."
Economists and real estate experts see other parallels as well. In the 1980's, the expectation of rising real estate prices made many Japanese homebuyers feel comfortable about taking on huge debt. And they did so by using exotic loans that required little money upfront and that promised low monthly payments, at least for a short time.
A similar pattern is found today in the United States, where the methods include interest-only mortgages, which allow homebuyers to repay no principal for a few years. Japan had its own versions of these loans, including the so-called three-generation loan, a 90- or even 100-year mortgage that permitted buyers to spread payments out over their lifetimes and those of their children and grandchildren.
But when property prices dropped in Japan, homeowners found themselves saddled with loans far larger than the value of their real estate. Many fell into bankruptcy, especially those who lost their jobs or took pay cuts as declining property prices helped to incite a broader recession. From 1994 to 2003, the number of personal bankruptcies rose sixfold, to a record high of 242,357, according to the Japanese Supreme Court, which tracks such data.
Even many of those who avoided financial collapse found themselves marooned in homes that they never intended as lifelong residences. For many Japanese homebuyers in the 1980's, land prices had risen so high that the only places they could afford were far from central Tokyo. Many went deep into debt to buy tiny or shoddily built homes that were two hours away from their offices.
Now, after years of tumbling land prices have made Tokyo more affordable again, few people are shopping for homes in the distant suburbs. That has led to severe declines in property values in these outlying areas, leaving many people with homes that are worth less than the balance on their mortgages from a decade or more ago.
Mr. Nakashima, who bought the apartment here in Kashiwa, said it would take him at least another decade to whittle down his loan to the point that he could pay it off by selling his home. And this assumes that the apartment does not drop further in value - a real possibility, because lower prices in Tokyo have led to a recent boom in construction of newer apartments in neighborhoods closer to downtown.
"We can't sell and get something better because we'll take such a huge loss," said Mr. Nakashima, a serious man who recounts his story with careful precision, sometimes pausing to check dates. "The collapse of the bubble robbed us of our freedom to choose where we can live."
He rues the idea that homes came to be seen as just another investment. "Homes should be different from stocks," he said. "They shouldn't be the object of speculative investing. If home prices move too much, they can ruin your life."
Mr. Nakashima says he is resigned to spending the rest of his days in Kashiwa. It is peaceful here, after all, he said. There is also a bit of history: he pointed to two tree-covered mounds in a corner of the apartment complex that are said to contain the severed heads of samurai killed in a battle here five centuries ago.
Some economists say that there are probably millions of people like Mr. Nakashima, trying to make the best of life in homes that are distant from work and for which they grossly overpaid. "There is a whole generation of homebuyers stuck out in far suburbs," said Atsushi Nakajima, chief economist at the research arm of the Mizuho Financial Group in Tokyo. "It's sad, but Japan has basically forgotten about them, and is moving on. They are just left out there."
Mr. Nakajima said he had barely missed being stuck out there himself. In 1991, he was looking at a 100-square-meter apartment (1,080 square feet) for about $600,000 about two hours outside Tokyo. He said his wife stopped him. Six years later, he spent the same amount to buy a more spacious house in a downtown neighborhood. "Maybe my wife should be the economist," he said.
Now that Japan's real estate market is finally showing signs of recovering from the 1991 collapse, economists say it offers a lesson for Americans in how to end - and not to end - a long slide in property prices.
For years after the real estate bubble burst, the Japanese government tried to resuscitate the market and other parts of the economy with expensive public works projects, but they were so poorly planned that they succeeded only in inflating the national debt.
NOT until the late 1990's did the government try a new tack: deregulation. To kick-start the economy, Tokyo started loosening restrictions on the financial industry. While most of this effort was aimed at reviving the banking industry, it also allowed investors to create real estate investment trusts, essentially mutual funds that invest in commercial property. A few years later, the government also eased building codes, such as height limits, and cut approval times for building permits.
Economists and real estate executives credit these changes with bringing new money into the market, and with making redevelopment easier. The results are visible in a boom that is dotting the Tokyo skyline with cranes and new high-rises.
They are also visible in statistics. Residential home prices in Tokyo rose 0.5 percent in the 12 months through July, the first gain in 15 years, the government said in September. Nationwide, land prices are still down, but the pace of decline has slowed to a crawl, the government said.
"Deregulation revived the Tokyo land market," said Toshio Nagashima, executive vice president at Mitsubishi Estate, one of Japan's largest real estate companies. He said the changes were one reason that his company committed to spend $4.5 billion by 2007 to build six skyscrapers in the central Marunouchi financial district.
Japanese economists say the United States is not likely to suffer a decline that is as severe or long-lasting as Japan's, because they see a more skilled hand at the tiller of the American economy: the Federal Reserve. Japan's central bank, the Bank of Japan, failed to curb the stock and real estate bubbles until mid-1989, when it was too late and prices were sky-high, they said.
When it did take action, it moved faster and more drastically than Japan's overinflated land and stock markets could handle, raising its benchmark interest rate to 6 percent from 2.5 percent over 15 months. Economists say that this pulled the rug out from under both markets at the same time.
Akio Makabe, a finance professor at Shinshu University in Matsumoto, says the Fed has been more deft in handling the rise in America's property market, which he believes is definitely in a bubble. He praised the Fed for apparently learning from Japan's mistakes, tightening more gradually and taking the economy's pulse as it does so.
"Japan shows the importance of avoiding a hard landing," Professor Makabe said. "Avoid big shocks. That is the biggest lesson of Japan's bubble."
Existing home sales slip in November
Existing home sales slip in November
DEC. 29 10:45 A.M. ET
Sales of previously owned homes fell by 1.7 percent in November, a fresh sign that the high-flying housing market is losing altitude.
The latest snapshot of activity in the housing market, released by the National Association of Realtors on Thursday, showed that November's sales of existing homes, including single-family, town homes and condominiums, totaled 6.97 million units at a seasonally adjusted annual rate. It marked the lowest level of sales since March.
The over-the-month decline was slightly steeper than the 1.3 percent drop that analysts were expecting before the report was released.
The Associated Press/WASHINGTON
By JEANNINE AVERSAAP Economics Writer
DEC. 29 10:45 A.M. ET
Sales of previously owned homes fell by 1.7 percent in November, a fresh sign that the high-flying housing market is losing altitude.
The latest snapshot of activity in the housing market, released by the National Association of Realtors on Thursday, showed that November's sales of existing homes, including single-family, town homes and condominiums, totaled 6.97 million units at a seasonally adjusted annual rate. It marked the lowest level of sales since March.
The over-the-month decline was slightly steeper than the 1.3 percent drop that analysts were expecting before the report was released.
The Associated Press/WASHINGTON
By JEANNINE AVERSAAP Economics Writer
Wednesday, December 28, 2005
What's on the Horizon for the Housing Market
What do other industry experts predict for 2006? Here's a roundup of opinions on the 2006 housing market from industry experts.
* According to the National Association of Home Builders, following strong growth over the past three years, home sales and housing production will ease back next year to around 2004’s historically healthy levels. “We’re looking for a good economy through 2006, with GDP growth remaining strong and with job creation running at roughly the same pace as in 2005 – key positive factors in the housing outlook,” said NAHB economist David Seiders. “Multi-family is doing well, with the condo share of the market up to about 50 percent at this point…We think multi-family starts will be pretty stable, with condos losing some market share in the year ahead and the rental side regaining some ground.”
*
The housing market for 2005 is headed for a fifth consecutive annual record, and sales activity in 2006 is expected to be the second best year in history, according to NAR. NAR economist David Lereah said: “The slowdown amounts to a tapping of the brakes on a hot market. Home sales are coming down from the mountain peak, but they will level-out at a high plateau–a plateau that is higher than previous peaks in the housing cycle.” The 30-year fixed-rate mortgage should trend up modestly and reach 6.6 percent during the second half of 2006.
*
According to Better Investing's Voice of the American Shareholder (VOAS) poll, the real estate industry is surpassed only by energy as a leading investment opportunity. More than 1,000 investors participated in the most recent VOAS poll. It is the second consecutive year that real estate has commanded a spot as one of the top investment choices in the survey, having debuted last year as number one.
* According to the National Association of Home Builders, following strong growth over the past three years, home sales and housing production will ease back next year to around 2004’s historically healthy levels. “We’re looking for a good economy through 2006, with GDP growth remaining strong and with job creation running at roughly the same pace as in 2005 – key positive factors in the housing outlook,” said NAHB economist David Seiders. “Multi-family is doing well, with the condo share of the market up to about 50 percent at this point…We think multi-family starts will be pretty stable, with condos losing some market share in the year ahead and the rental side regaining some ground.”
*
The housing market for 2005 is headed for a fifth consecutive annual record, and sales activity in 2006 is expected to be the second best year in history, according to NAR. NAR economist David Lereah said: “The slowdown amounts to a tapping of the brakes on a hot market. Home sales are coming down from the mountain peak, but they will level-out at a high plateau–a plateau that is higher than previous peaks in the housing cycle.” The 30-year fixed-rate mortgage should trend up modestly and reach 6.6 percent during the second half of 2006.
*
According to Better Investing's Voice of the American Shareholder (VOAS) poll, the real estate industry is surpassed only by energy as a leading investment opportunity. More than 1,000 investors participated in the most recent VOAS poll. It is the second consecutive year that real estate has commanded a spot as one of the top investment choices in the survey, having debuted last year as number one.
Sunday, December 25, 2005
Brokers Use Video Stories to Sell Luxury Homes
Brokers Use Video Stories to Sell Luxury Homes(December 21, 2005) -- Real estate professionals increasingly are using custom-made video stories to sell luxury homes in New York; Chicago; Los Angeles; Miami; Dallas; Lake Tahoe, Nev.; Vail, Colo.; and Sarasota, Fla.; among other markets. Inman News' Inman Stories creates three-minute digital movies, which can be posted on the practitioner's Web site, made into DVDs, or e-mailed to prospective buyers. John McWeeny of Inman Stories says practitioners would rather spend $2,500 for the video stories than spend a huge amount of time and money on print ads and mail campaigns. Unlike video tours, McWeeny notes that "video stories bring to life the character of a property like no other tool on the market, from unique architectural elements to the neighborhood feel and history of a home." Source: Market Wire (12/20/05)
Jim Gramata produces, edits and creates a professionally edited digital movie for ANY property, not just luxury homes. A sample video is posted on his website here
http://rememberjim.com/podcast/5320web708.mov
Or a slideshow of the condo can be seen here:
http://www.rememberjim.com/featured/5320sheridan/5320708.mov
and visit the photo gallery here
http://www.rememberjim.com/featured/5320sheridan/5320sheridan.html
Each of these is produced for any property I market. Jim can also burn a DVD of this video as mentioned in the article above. He provides all of these services at NO EXTRA CHARGE and does not limit this service to multi-million dollar listings, but includes this production as part of ANY property marketing plan including the $229,900 condominium shown in these sample links. Call Jim Gramata at 773-252-HOME if you want your property to be marketed with the highest level of sales strategies available to EVERYONE regardless of price point.
Because your agent matters.
Jim Gramata produces, edits and creates a professionally edited digital movie for ANY property, not just luxury homes. A sample video is posted on his website here
http://rememberjim.com/podcast/5320web708.mov
Or a slideshow of the condo can be seen here:
http://www.rememberjim.com/featured/5320sheridan/5320708.mov
and visit the photo gallery here
http://www.rememberjim.com/featured/5320sheridan/5320sheridan.html
Each of these is produced for any property I market. Jim can also burn a DVD of this video as mentioned in the article above. He provides all of these services at NO EXTRA CHARGE and does not limit this service to multi-million dollar listings, but includes this production as part of ANY property marketing plan including the $229,900 condominium shown in these sample links. Call Jim Gramata at 773-252-HOME if you want your property to be marketed with the highest level of sales strategies available to EVERYONE regardless of price point.
Because your agent matters.
Friday, December 23, 2005
Fed Says Soften in Economy buy Inflation and Unemplyment Down
U.S. Economic Growth Will Soften in 2006, Chicago Fed
Economic Outlook Symposium Participants Say
Forecasts from Nineteenth Annual Economic Outlook Symposium
2004 2005 2006
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604
www.chicagofed.org
Contact: Debbie Baratz
Media Relations
312-322-2387
The nation’s economic growth will soften slightly in 2006, inflation
will decrease, and the unemployment rate will edge lower, according
to the median forecast of participants at the Federal Reserve
Bank of Chicago’s Economic Outlook Symposium. The consensus
outlook shows that real gross domestic product (GDP) is
forecast to increase 3.6% this year and 3.2% in 2006. Inflation,
as measured by the Consumer Price Index, is expected to rise
3.9% this year and then moderate to 3.0% in 2006. The unemployment
rate is forecast to fall to 5.1% by the end of this year
and edge down further to 5.0% by the end of 2006.
The nineteenth annual Economic Outlook Symposium, held in
Chicago on December 2, drew participants from manufacturing,
banking, auto industries, academia, consulting, and service firms.
One session of the Symposium presented the results from the
consensus economic outlook. This year, 32 individuals provided
forecasts for major components of real GDP as well as several
key statistics for the U.S. economy. The median forecast results
are presented in the table.
All major components of real GDP are expected to contribute
to the slight softening expected in economic growth next year,
particularly a projected flattening in residential investment.
Notably, the consensus outlook shows residential investment
to increase 7.0% this year and then fall 0.8% in 2006. Most major
real GDP components are forecasted to continue expanding
in 2006, albeit at a slower pace than in 2005. Symposium participants
anticipated that light vehicle sales will edge down to
16.8 million units in 2006. Oil prices are expected to decrease
to just above $55 next year. Additionally, real personal consumption
expenditures are projected to edge down from 3.1% this
year to 3.0% next year. Housing starts are also expected to drop
slightly from 2.04 million in 2005 to 1.90 million in 2006.
However, industrial production growth is forecasted to improve
from a 2.4% increase in 2005 to a 3.2% increase next year.
Interest rates, both short term and long term, are expected to
rise roughly one-half percent in 2006. With both short-term
and long-term rates rising the same amount, this suggests that
the yield curve will stay relatively constant.
A summary of the nineteenth annual Economic Outlook
Symposium will be published in an upcoming issue of the
Chicago Fed Letter.
—William A. Strauss • Senior Economist and
Economic Advisor • 312-322-8151
Economic Outlook Symposium Participants Say
Forecasts from Nineteenth Annual Economic Outlook Symposium
2004 2005 2006
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604
www.chicagofed.org
Contact: Debbie Baratz
Media Relations
312-322-2387
The nation’s economic growth will soften slightly in 2006, inflation
will decrease, and the unemployment rate will edge lower, according
to the median forecast of participants at the Federal Reserve
Bank of Chicago’s Economic Outlook Symposium. The consensus
outlook shows that real gross domestic product (GDP) is
forecast to increase 3.6% this year and 3.2% in 2006. Inflation,
as measured by the Consumer Price Index, is expected to rise
3.9% this year and then moderate to 3.0% in 2006. The unemployment
rate is forecast to fall to 5.1% by the end of this year
and edge down further to 5.0% by the end of 2006.
The nineteenth annual Economic Outlook Symposium, held in
Chicago on December 2, drew participants from manufacturing,
banking, auto industries, academia, consulting, and service firms.
One session of the Symposium presented the results from the
consensus economic outlook. This year, 32 individuals provided
forecasts for major components of real GDP as well as several
key statistics for the U.S. economy. The median forecast results
are presented in the table.
All major components of real GDP are expected to contribute
to the slight softening expected in economic growth next year,
particularly a projected flattening in residential investment.
Notably, the consensus outlook shows residential investment
to increase 7.0% this year and then fall 0.8% in 2006. Most major
real GDP components are forecasted to continue expanding
in 2006, albeit at a slower pace than in 2005. Symposium participants
anticipated that light vehicle sales will edge down to
16.8 million units in 2006. Oil prices are expected to decrease
to just above $55 next year. Additionally, real personal consumption
expenditures are projected to edge down from 3.1% this
year to 3.0% next year. Housing starts are also expected to drop
slightly from 2.04 million in 2005 to 1.90 million in 2006.
However, industrial production growth is forecasted to improve
from a 2.4% increase in 2005 to a 3.2% increase next year.
Interest rates, both short term and long term, are expected to
rise roughly one-half percent in 2006. With both short-term
and long-term rates rising the same amount, this suggests that
the yield curve will stay relatively constant.
A summary of the nineteenth annual Economic Outlook
Symposium will be published in an upcoming issue of the
Chicago Fed Letter.
—William A. Strauss • Senior Economist and
Economic Advisor • 312-322-8151
New Homes Sales Slump
New-home sales spring a leak
As contracts dip in 4th qtr., builders slash prices, dangle incentives; a 12% drop projected for '06
New-home sales are falling in the Chicago area, signaling an abrupt end to an unprecedented growth streak.
Amid rising interest rates, weakened consumer sentiment and talk of a housing bubble, sales of new homes slipped this fall, a trend expected to accelerate next year. Real estate consultant Tracy Cross projects Chicago-area sales will drop 6% in the fourth quarter and a steep 12% in 2006. That would be the first annual decline since 2002, and only the second in the past 12 years.
"We're starting to see some erosion in the market," says Mr. Cross, president of Tracy Cross & Associates Inc. in Schaumburg. The economy and job growth are "not going to be strong enough to offset the impact of (mortgage) rate increases."
Inventories of unsold homes are rising, prices are falling, and builders are rolling out incentives to stoke demand. In a recent Chicago Tribune ad, Dallas-based builder Centex Corp. touted price cuts at 15 homes in the far west suburbs. A four-bedroom house at a Centex development in Elgin now sells for $390,015, down about 10% from $435,015.
Dan Star, president of Centex's Illinois division, says price cuts are nothing out of the ordinary for this time of year. But Mr. Cross, the consultant, says builders — especially publicly held ones like Centex — have become more aggressive with incentives in recent months. The use of incentives "is the largest I have ever seen it," he says.
Builders have grown more pessimistic nationwide, as well. The National Assn. of Home Builders/Wells Fargo's Index of builder confidence slipped to 60 in November from 68 in October — an 18-month low and its biggest drop in four years.A slump in homebuilding would ripple through the local economy, affecting everyone from surveyors to excavating firms to lumber yards. Nearly 195,000 people work in jobs related to new housing, or about 5% of the area's overall workforce, according to Economy.com Inc.
'A SOFT LANDING'
While national builders have been busy in the suburbs, local condo developers have been especially active in the city, where torrid construction has sparked talk of a bubble. Condo projects present a greater risk than single-family suburban developments, as developers start construction well before all units are sold and thus can be stuck with a lot of excess inventory if the market sours.
Despite the sharp downturn ahead, sales are expected to rise for the full year of 2005, marking the fourth year of record sales here. Even with the 12% decline Mr. Cross predicts, 2006 would be one of the strongest years ever in the local homebuilding market.
"This is the biggest year we ever had, but next year is going to be even bigger," says Doug Brown, president of Libertyville-based Cambridge Homes Inc., which is owned by D. R. Horton Inc., a publicly held homebuilder in Texas.
However, recent evidence suggests that the Chicago market is deteriorating fast. New-home sales contracts fell in September, October and November from the same months in 2004, according to a recent survey of big homebuilders in the area by Strategy Planning Associates Inc., a Schaumburg real estate consultancy. November saw a 50% drop, the steepest of the year.
"We seem to be headed toward a soft landing," says Strategy Planning President Steven Hovany, who predicts new-home sales will drop about 5% next year. "People are a little more concerned now" about the economy.
Rising interest rates have crimped demand, as well. Thirty-year fixed-rate mortgages last week averaged 6.30% nationwide, up from 5.68% a year ago, according to the Federal Home Loan Mortgage Corp.
Majestic Research Inc., a New York-based research firm that covers publicly held homebuilders, recently ranked Chicago the third-weakest homebuilding market among U.S. metro areas it measures. The number of homes built but not sold in the Chicago area was 20% higher in October than it was a year earlier, Majestic Research analyst Matthew Burr says. At the same time, prices of new homes fell slightly in October from September, the first decline since November 2004.
OFFERING INCENTIVES
Robert Toll, CEO of Pennsylvania-based builder Toll Bros. Inc., recently called Chicago one of its weakest markets.
"I think there's some fear among the clientele right now about the economy, and they're just waiting until after the holidays to make some decisions," says Andy Stern, vice-president of the Illinois division at Toll Bros., which has 16 projects in the area.
Because it plays at the high end of the market — its average home price is $600,000 — Toll has felt more pain than its peers. Local sales rose in the fiscal year ended Oct. 31 but have slumped since then, Mr. Stern says, though he won't specify figures.
To stimulate demand, Toll is offering deals on kitchen appliances and hardwood floors. "We're doing what we need to do to get people in the door," Mr. Stern says. "I think we have to go back to the days of selling rather than being order takers."
As contracts dip in 4th qtr., builders slash prices, dangle incentives; a 12% drop projected for '06
New-home sales are falling in the Chicago area, signaling an abrupt end to an unprecedented growth streak.
Amid rising interest rates, weakened consumer sentiment and talk of a housing bubble, sales of new homes slipped this fall, a trend expected to accelerate next year. Real estate consultant Tracy Cross projects Chicago-area sales will drop 6% in the fourth quarter and a steep 12% in 2006. That would be the first annual decline since 2002, and only the second in the past 12 years.
"We're starting to see some erosion in the market," says Mr. Cross, president of Tracy Cross & Associates Inc. in Schaumburg. The economy and job growth are "not going to be strong enough to offset the impact of (mortgage) rate increases."
Inventories of unsold homes are rising, prices are falling, and builders are rolling out incentives to stoke demand. In a recent Chicago Tribune ad, Dallas-based builder Centex Corp. touted price cuts at 15 homes in the far west suburbs. A four-bedroom house at a Centex development in Elgin now sells for $390,015, down about 10% from $435,015.
Dan Star, president of Centex's Illinois division, says price cuts are nothing out of the ordinary for this time of year. But Mr. Cross, the consultant, says builders — especially publicly held ones like Centex — have become more aggressive with incentives in recent months. The use of incentives "is the largest I have ever seen it," he says.
Builders have grown more pessimistic nationwide, as well. The National Assn. of Home Builders/Wells Fargo's Index of builder confidence slipped to 60 in November from 68 in October — an 18-month low and its biggest drop in four years.A slump in homebuilding would ripple through the local economy, affecting everyone from surveyors to excavating firms to lumber yards. Nearly 195,000 people work in jobs related to new housing, or about 5% of the area's overall workforce, according to Economy.com Inc.
'A SOFT LANDING'
While national builders have been busy in the suburbs, local condo developers have been especially active in the city, where torrid construction has sparked talk of a bubble. Condo projects present a greater risk than single-family suburban developments, as developers start construction well before all units are sold and thus can be stuck with a lot of excess inventory if the market sours.
Despite the sharp downturn ahead, sales are expected to rise for the full year of 2005, marking the fourth year of record sales here. Even with the 12% decline Mr. Cross predicts, 2006 would be one of the strongest years ever in the local homebuilding market.
"This is the biggest year we ever had, but next year is going to be even bigger," says Doug Brown, president of Libertyville-based Cambridge Homes Inc., which is owned by D. R. Horton Inc., a publicly held homebuilder in Texas.
However, recent evidence suggests that the Chicago market is deteriorating fast. New-home sales contracts fell in September, October and November from the same months in 2004, according to a recent survey of big homebuilders in the area by Strategy Planning Associates Inc., a Schaumburg real estate consultancy. November saw a 50% drop, the steepest of the year.
"We seem to be headed toward a soft landing," says Strategy Planning President Steven Hovany, who predicts new-home sales will drop about 5% next year. "People are a little more concerned now" about the economy.
Rising interest rates have crimped demand, as well. Thirty-year fixed-rate mortgages last week averaged 6.30% nationwide, up from 5.68% a year ago, according to the Federal Home Loan Mortgage Corp.
Majestic Research Inc., a New York-based research firm that covers publicly held homebuilders, recently ranked Chicago the third-weakest homebuilding market among U.S. metro areas it measures. The number of homes built but not sold in the Chicago area was 20% higher in October than it was a year earlier, Majestic Research analyst Matthew Burr says. At the same time, prices of new homes fell slightly in October from September, the first decline since November 2004.
OFFERING INCENTIVES
Robert Toll, CEO of Pennsylvania-based builder Toll Bros. Inc., recently called Chicago one of its weakest markets.
"I think there's some fear among the clientele right now about the economy, and they're just waiting until after the holidays to make some decisions," says Andy Stern, vice-president of the Illinois division at Toll Bros., which has 16 projects in the area.
Because it plays at the high end of the market — its average home price is $600,000 — Toll has felt more pain than its peers. Local sales rose in the fiscal year ended Oct. 31 but have slumped since then, Mr. Stern says, though he won't specify figures.
To stimulate demand, Toll is offering deals on kitchen appliances and hardwood floors. "We're doing what we need to do to get people in the door," Mr. Stern says. "I think we have to go back to the days of selling rather than being order takers."
Saturday, December 17, 2005
Edgewater Live! Coming to life soon...
Check out my Edgewater podcast on the beginnings of what I hope will be a useful resource for our Chicago Edgewater community.
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