Mixed emotions cloud buying, selling plans

CHARLES Sterling planned to wait until 2003 to sell his current home in Annapolis, MD and move back to his home town near Charleston, WV where a family business awaits his take over.

His current home has earned $50,000 in equity and he'd hoped to use that and what he though would be more equity to come to acquire the business and buy a new home.

Then terrorists attacked the World Trade Center and the Pentagon and thrust the nation into a new kind of war.

"It's ironic. We just started talking about this (relocating) a month ago. Now, I would like to do it before my home value drops. I could buy now and buy the business out of the profits, but that could become less of a possibility," Sterling said.

First-time home buyers in Laguna Beach, CA John and Carol Bryce want to end a life time of renting and cash in on near record low mortgage interest rates with their first home, hopefully a $265,000 condo.

Now, however, they are afraid they will buy at the top of the market only to see their home value immediately plummet.

"The $265,000 condo was $180,000 a year ago and we had a fear that we were going to be priced out of the market. Now (after the terrorists attacks) I think I'm buying at the peak of the market, like in 1990 (at the time of the Gulf War) there had been similar price increases and the whole market dropped 20 to 30 percent," said John Bryce.

"I just want a home, but there's a fear a very strange feeling that values could drop," he added.

Along with the fear of more terrorism, deep mourning and growing anger, terrorists attacks on America are also generating feelings of insecurity and uncertainty among real estate consumers.

Residential real estate experts, however, are warning against knee-jerk reactions to what could affect the most valuable purchase many will ever make.

"Our homes are both a social and financial investment. Financial experts usually ignore the social reasons for buying and selling our homes. Factors such as relocation for employment, better schools, better neighborhoods, decrease or increase in family size, retirement, etc., will influence our decision more than investment considerations," said Jordan Clark, president of the Washington, DC-based United Homeowners Association.

"Social factors are less likely to be effected by the despicable acts of terrorists than are the investment considerations of home buying," he added.

Real estate consumers balk

Initially, however, terrorists' attacks triggered an immediate withdrawal by online home buyers and sellers.

The number of home buyers filing profiles in search of a real estate agent at HomeGain.com fell 56 percent during the six-day period beginning on Tuesday, Sept. 11, when compared to the same Tuesday-Sunday period of the prior week. Additionally, 57 percent fewer home sellers sought an agent this past week versus the same six-day period the week prior.

"I think it was a shock. People were glued to TV sets and real estate agents noticed a sharp drop off. People had other things on their minds. Hopefully we are starting to see people returning to market," said Mark Marymee, HomeGain's spokesman.

Real estate market analysts also pulled back on their projections.

The Wall Street Journal reported its partner economic forecasting firm Case Shiller Weiss, lowered its price projections for 18 out of 20 cities that it tracks and now expects prices to rise just 2.4 percent nationally this year -- 3 percentage points below its earlier forecast.

Real estate experts, however, were hammering home the point that housing decisions more often should be based on personal need and individual financial ability rather than what the market may or may not do because of terrorism.

"When you have ugly events like we have had, people say our lives will never be the same. But that's short-sighted," says Dr. Mark G. Dotzour, chief economist for the Real Estate Center at Texas A&M University.

"Despite all the negative economic news this year, the housing market has been incredibly resilient. As long as you live in a community that has positive job growth and you have low mortgage rates, like we have now, you can't help but sell houses," said Dotzour recently speaking to a joint convention of the Louisiana and Texas Associations of Realtors in Dallas, TX.

Real estate power

Indeed, in the waning days of the longest economic expansion on record, real estate has been perhaps the strongest economic sector, laregly credited with keeping the weakened economy out of recession.

That's because so much of consumer spending is tied to the home. Consumers who buy homes also buy things to put in it, they use the equity to buy still more stuff and then they buy bigger, more expensive, larger homes to fill up with yet more stuff.

And consumer spending is the real lubricant that keeps the economy cranking -- it accounts for at least two thirds of the gross domestic product, a measure of the output of goods and services produced by labor and property in the United States.

The real estate sector has been buoyed by near record low mortgage rates that, even after the terrorists' attacks, continued to be a strong reason to buy a home.

Even if rates rise and prices fall, buying and selling a home will remain largely a personal decisions.

"All we have to do is think back to 1990 when we went to Kuwait and everybody froze for about three months. My response is "How long can you hold your breath before life goes back on?' " asked Ray Brown, a San Francisco real estate broker and author of several "Dummies" guides to residential real estate.

"People buy and sell homes because people get married, people get divorced, people are born and people die, retire and lose jobs. You might not think it's the optimum time to buy or sell until you can't put your life on hold any longer," he added.

Real estate consumer confidence

And not all research revealed consumers were backing away from real estate and related purchases.

Even though they expect additional financial turmoil, Americans will not spend less or alter their investment decisions -- including real estate investments -- according to a Harris Interactive poll of more than 4,600 adults taken two days after the terrorists' attacks.

When asked "Because of September 11's events, do you think that real estate will be a better or worse investments over the next weeks and months?" 54 percent said a real estate investment would be about the same, 10 percent said it would be a better investment, only 14 percent said it would be worse and 22 percent said they didn't know, according to Rochester, NY-based Harris Interactive.

Also on Sept. 13, the New York City-based Simmons Market Research Bureau revealed after the attack, most consumers weren't changing plans to buy household items.

Simmons found the attack won't delay plans of 70 percent of consumers who said they'd already decided in the next month to buy a big-ticket items, such as major appliances. More, 81 percent, said the attacks would not make them forego planned purchases in the next 30 days of smaller household appliances and electronics. And still more, 83 percent, said they were going to spend the same amount of money on household essentials as they typically do in a 30 day period, according to Simmons' poll of 1.093 respondents.

"The American public has been shaken by the atrocity of last week's terrorist attacks, but we are holding steadfast in many respects, including our attitudes about the economy and spending," said Chris Wilson, president of Simmons.

"Consumer confidence remains resilient and Americans have faith in the strong and enduring financial health of our country. American businesses should understand and be assured that consumers plan to resume spending near pre-attack levels," he added.

Attacks may exacerbate SV downturn

Unfortunately, after the terrorists' attacks, some consumers found themselves unable to consider buying much of anything because of layoffs, investment market losses and other income-threatening fallout.

Even before the attacks, the technology sector was on the ropes, manufacturing had hit a wall and unemployment was on the rise. After the attacks, airlines, travel and related industries suffered devastating losses and layoffs and aftershocks reverberating through Wall Street sent the Dow Jones industrials down for the week of Sept. 17 by the largest percentage since 1940.

"Most of my clients get their money from the stock market and I would say the economy was slowing down and I'm even more concerned now with the terrorists' events," said Jennifer McGowan, a Los Gatos, CA interior designer who is putting her move-up plans on hold.

Not only are her clients unable to pull as much cash out of investments as they did during boom times, the Silicon Valley market where Los Gatos is located, is also faltering.

McGowan purchased a $435,000 home two years ago. Since then, her home value rose to $719,000, but has since slipped back to about $600,000.

She'd like to move up, but her financial uncertainty is causing her to take a second look at the difference in property taxes for a $400,000 home and a home in her $800,000 move-up price range.

"The market has been so good, I haven't advertised in five years, but now I'm going to start advertising. I think right now everybody is in the panic mode," McGowan said.

"I think I'm going to sit tight, maybe until spring and see what happens. Meanwhile I'm doing some remodeling instead of moving up. Maybe I'll just buy a place in the mountains that's isolated and I can pay cash for it," she added.