A forecast less gloomy
Harold Bubil - Herald Tribune
Article published Dec 3,2005

In a region where real estate is king, economist John Tuccillo has good news.
The king is not dead."

There is no bubble in the real estate market because there is no 'the real estate market,'" Tuccillo told a group of developers Wednesday at Fleming's restaurant in Sarasota. "

There are hundreds of thousands of real estate markets," separated by location and price, and the underlying economy is key to the health of each of them."

The most vulnerable market is Detroit," said Tuccillo, a Sarasota resident who is former chief economist for the National Association of Realtors. All those nasty General Motors job cuts will make Rust Belt real estate even cheaper, but not affordable. Even cheap real estate, he said, is not affordable for those who don't have jobs."

There has never been a real estate bubble except where the underlying economy has been pulled out ... from under the market," Tuccillo told the developers, who were brought together by Michael Saunders.

"Where the underlying economy is weak or sour, you have a vulnerable housing market. Where it's not, you don't."

Does that mean the world will continue to go on as it has?" he asked. "No. When the activity in the market outstrips its capacity, the market simply stops. Sales go down, prices drop off. And so it's a series of plateaus broken up by upward movements."

What about the increases of inventory and decreases in sales we're seeing now?"

We see them because there's greed out there and there's fear out there. There's greed in the sense that homeowners are anxious to take their paper gains and convert them into actual cash. There's fear ... because people fear they're going to miss it and they want to get out of the market as it is. And so what you've got is a lot more houses being put up for sale."

You also have a lot of unrealistic sellers. Sellers are always the last to get it. Sellers believe that their houses are worth the highest number that anyone's ever mentioned in association with it, plus 10 percent. So in a market that is starting to cool off, sellers will insist on wildly overpricing their houses."

Tuccillo said the recent inventory figures represent a market that is coming into balance. "Sales are down. Inventories are up. Is this the end of the world? Well, inventories are up to 4.9 months. The benchmark number is 5.5 months. That's a balanced market. We're still in a seller's market; we're down from a wildly seller's market to a mildly seller's market."