Caption of the main photo in yesterday’s New York Times real estate section: ‘Anthony Gordon, a photographer, paid $625,000 for his 2,200-square-foot loft five years ago and was recently offered $3.5 million for it.’
Thesis of my story in yesterday’s PARADE: Real estate prices have run up so far so fast in some areas, they may be ripe for a correction. Sorry there’s no link to the story, but it’s not exactly rocket science: Someday, mortgage rates may rise. That will make high home prices harder to support. Uh, oh. Or perhaps the economy will stay sluggish and interest rates won’t rise. High unemployment does not ordinarily a robust housing market make. Uh, oh. (And rising property taxes to cope with massive state budget deficits won’t make home ownership any more attractive, either.)
The Administration and the Fed appear to be pulling out all the stops to keep rates low and housing strong, at least through January, 2005. Adrian Van Eck, a long-time observer of these are other markets, writes in his latest newsletter (Box 1697, Naples, ME 04055): ‘When I began to write this newsletter, just seven days ago, I personally was skeptical about the likelihood that the Fed or Fannie Mae or banks and other lenders could prevent a traditional post-boom decline in home prices. Now I’m starting to believe they can succeed!’
To real estate investors, it is a variation on the old stock market saw: ‘Never fight the Fed.’ If the federal government and, especially, the Federal Reserve, are determined to keep real estate prices strong, as seems to be the case – at least through the next election – they may well succeed. And a strong housing market could be a major lift to the U.S. economy, which is something the rest of the world’s far too sluggish economy sure could use.
Still, if I were photographer Anthony Gordon, I would take the $3.5 million and run.
Tomorrow: My Meeting with John Ashcroft
Quote of the Day
Farming looks mighty easy when your plow is a pencil and you're a thousand miles from the corn field.~Dwight Eisnehower
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