Posted on 01/19/2006 10:50:57 AM PST by iPod Shuffle
There is no housing bubble, says senior economist
By BATTINTO BATTS JR., The Virginian-Pilot
January 19, 2006
NORFOLK — A nationally known economist visited Hampton Roads on Wednesday, bringing good news for developers and those charged with growing the region’s economy.
Interest rates are expected to remain low throughout 2006 and likely for a while beyond. And businesses are expected to make investments in expansion and technology.
Those two scenarios, offered by Mark Vitner, senior economist with Wachovia Corp., were presented to a lunchtime gathering of the Hampton Roads Association for Commercial Real Estate. The annual luncheon, held at the Hilton Norfolk Airport, featured a brief presentation from Vitner on the U.S. economy, the financial markets and Hampton Roads.
“There’s a couple of shifts taking place in the economy,” said Vitner, who has been featured on CNBC. “We are shifting from a home-building economy to one of business investment.”
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-Email this Page -Print this Page -Get Email Newsletters Numbers he presented, comparing change from a year ago , show that national spending on information processing equipment and software was up 11.1 percent during the third quarter of 2005. At the same time, other capital spending was up 10 percent. Also, nondefense capital goods orders were up 7.4 percent.
For economic development directors, that means opportunities, said James Eason, director of development for the city of Hampton. “There is always a focus on the kinds of jobs that we are bringing,” Eason said. “We think we have a solid base to build on and to meet our goals.”
The business investment numbers and employment growth are indicators that the economy is strong, Vitner said. He cited statistics showing the U.S. economy added 108,000 jobs in December and the civilian unemployment rate was 4.9 percent nationally and 3.5 percent in Virginia.
“The economy is shaking off the effects of the stock market bubble,” Vitner said.
The Wachovia economist cautioned against the perception that the housing market will be the next to go bust.
“Everybody is looking for evidence of a housing bubble,” he said. “There is not a housing bubble. The supply had not kept up with demand.”
Although the number of housing starts has begun to decline, that is an indicator that the supply is catching up, Vitner said. And he said the housing market continues to be driven by baby boomers who are retiring or close to doing so.
Vitner expects interest rates to remain low, a factor that will affect the number of people taking out mortgages on homes. Someone in the audience asked Vitner whether he was concerned that so many of the home buyers were financing their purchase through the use of interest-only or other nontraditional mortgage methods. Some experts have predicted that an increase in interest rates could lead to scores of loan defaults by buyers who have purchased more house than they can afford.
Vitner thinks that is an overblown doomsday prediction.
“It takes a lot to foreclose on your home,” he said. “If you just pick up the phone, the bank can work up a plan with enough payment holidays to get you through just about anything.”
The prediction that interest rates will remain low at least through this year was welcome news to commercial real estate developers, such as Harvey L. Lindsay Jr. whose company has a number of projects in the region.
“I think his analysis is right on the mark,” said Lindsay, chairman of NAI Harvey Lindsay Commercial Real Estate Services, Worldwide. “The cost of land is so high that it makes it difficult to do development. My fear is that buyers are paying high prices. At some point, they will realize they will not get the return they had expected.”
Just like "there is no terrorist threat" eh Michael.
I am vastly relieved.
But maybe we should check with a junior economist, just to make sure. It's always helpful to know what's going to happen in the future.
Happy Days are here again! Oh, nevermind, it was an economist who made this statement.
Wonder how many speculative real estate deals he has his fingers in, a little CYA there Michael?
$59,900 sounds more like it! Must've been a typo!
Nope, $599,000.00!
That's the So Cal. real estate market for you.
"Those two scenarios, offered by Mark Vitner, senior economist with Wachovia Corp"
Gosh! You think Wachovia is an uninterested party? How much of their money is tied up in mortage loans? Sounds like panic mode for them and the rest of the banking industry.
All that collateral sinking in value....all those "creative" loan "products" about to default. Oopsie!
Does the insurance company come with it? LOL.
If salary increases don't match the increase in housing prices, a bubble exists.
Eventually something has to give. End of story.
LOL
"Sounds like panic mode for them and the rest of the banking industry."
If that were the case, why would he put out such a positive report?
""Sounds like panic mode for them and the rest of the banking industry."
If that were the case, why would he put out such a positive report?"
I thought they packaged them into bonds, and sold them to hedge funds and other high flyers.
So, you think a senior economist of a major financial institution has made a fraudulent report?
"So, you think a senior economist of a major financial institution has made a fraudulent report?"
Well, that's a little strongly worded. Let's say he did a little creative interpretation of the data. Now, doesn't that sound more polite?
So, you think a senior economist of a major financial institution has made a fraudulent report?
Let's re-word that a little more precisely: ...So, you think a senior economist of a major financial institution with a significant investment in real estate has made a fraudulent report?
"Let's say he did a little creative interpretation of the data."
What data did he get creative with? I'm having trouble following your thinking.
If your talking about mortgage-backed securities. Yes. But the banks still collect generous underwriting fees and commissions on these deals so its in their best interests to keep these deals going.
Banks are looking more and more like hedge funds these days. Its a constant balancing act of risk management strategies. Especially the banks heavy in the mortgage business like Washington Mutual, Wells Fargo, Bank of America, and Wachovia.
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