Norton On Real Estate: Economically, is it the calm before the storm?

I was hoping to have a snow day so I would write this column in peace and quiet in front of the fire. Not this winter! In fact, personally I was hoping for heavy winters while my big, strong teenage son, Tim (16), was at home — then light winters when he goes off to college.

Well it is February already, and I received another $250 natural gas bill for heating the house in January (up 63 percent from a year ago). At NAM, we are busy with sale and leasing transactions as well as a full plate of consulting and advisory work. So we don’t see a slowdown or softening. But we see more residential “For Rent” signs. We see more auction notices in the newspapers, and when we updated our quarterly office market studies for the Bedford/Manchester and Concord markets, we saw very little net absorption.

The recent brouhaha over Ford and GM is news spin. Neither is likely to go belly-up. But their business segments are changing. Their manufacturing arms are still reeling and will not rebound any time soon. Both companies as we know them will continue to get smaller. Count your lucky stars that you’re not trying to sell a home in Detroit.

Alan Greenspan has taken retirement without major incident. The Dow is teasing 11,000, but prognostications of 12,000 seem far-fetched. Inflation eased somewhat over the year end, but the cost of energy, health care (especially prescription drugs) and higher education are still climbing into the stratosphere. Economic growth, more moderate than last year, is still positive. Maybe the inverted yield curve (long-term bond rates lower than short-term rates) will not trigger a recession this time. Recession is defined as three consecutive quarters of negative growth.

The housing bubble is in the daily news. Prices are easing. Homes are not going under contract instantly. Two houses in my neighborhood have been on the market for nearly six months. Both have had at least one price reduction. Interest rates are up and down but currently in the low- to mid-6’s for a 20- or 30-year fixed residential mortgage.

The tremendous run-up in homeowners’ equity is one form of savings. The baby boomers do in fact have significant assets and wealth. Not each and every one of them — but many, if not most.

The general sense is that we are in for some disillusionment, not this year, but certainly over the next half-dozen. The federal budget deficits, our struggles in the Middle East, the cost of the war on terror, Social Security and Medicare — all of these are going to come down on the backs of taxpayers. So you and I will likely have to work two, three, five years longer than we would like. But we are going to live five years longer, so it all comes out in the wash.

The president was right on one topic in his State of the Union address. We need to reduce our consumption of oil today, tomorrow and dramatically in the next two decades. There are many ways to do this, but if Paul Roberts, author of “The End of Oil: On the Edge of a Perilous New World,” is right, we are going to come up short in 20 to 25 years, not to mention market fluctuations and volatility each and every year.

Is there a technology solution? We better hope so! Otherwise those darn Texans may see their wish come true — that we New Englanders freeze in the dark! nhbr

Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE), a Fellow of the Royal Institution of Chartered Surveyors (FRICS) and a member of the board of The Initiative for a 20/20 Vision for Concord. He can be reached at

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