Toll: Speculator-fueled boom in unload mode
Philadelphia Inquirer – The chief executive officer of Toll Bros. Inc. acknowledged yesterday what many in the housing industry have long feared. Speculators helped fuel the housing boom, and now they’re trying to unload homes in a weakening market.
“In 2005, demand for new homes in many markets was propelled to unsustainable levels by speculative buying,” Bob Toll said in a quarterly earnings conference call. “We are now on the other side of that slope.”
Some regions have experienced more speculation than others, Toll said, mentioning Washington, Las Vegas and Orlando, Fla. He characterized the Philadelphia region as holding steady.
It is troubling news for a housing market that has been hurt by rising interest rates and a growing inventory of unsold homes and condominiums. Data from the National Association of Realtors show that the number of unsold existing homes last year rose 524,200, to 2.5 million, as more people tried to sell homes than there were buyers for.
The number of existing unsold condos rose last year by 135,000 units, to 483,500. The numbers do not include new homes or condos.
Mark Zandi, chief economist with Moody’s Economy.com, said that the housing market peaked last summer and that a correction could last three years. “It does not feel that this market is crashing; it will correct,” Zandi said, noting that he expected home prices to decline in many places. In the most overpriced markets, declines will range from 10 percent to 15 percent, he predicted.
Several economic factors will keep the real estate market from slumping as deeply as it did in the early 1990s, Zandi said. The job market is strong, and mortgage lenders are solvent. And housing speculation in recent years was not as rampant as it was in the late 1980s, when a housing glut was produced by the early 1990s.