Norton on Real Estate: Winter may measure economy’s resilience

Alan Greenspan’s proposed successor has been named, and we will likely see little in the way of changes at the Fed. This means rising interest rates attempting to prevent rising inflation. A little bit of inflation is not such a bad thing, but runaway inflation is scary. It is of special concern, given the relatively benign inflation we have seen over the past several years. In fact, in some areas we have experienced price decreases (aka deflation).

To quote David Carlson of D.L. Carlson Investment Group in Concord, “The danger is that the Fed policy overreacts to what may well be a temporary price spike and thus exacerbates a housing- and consumer-related slowdown.”

Did everyone notice that gasoline prices dropped 30 cents over a 72-hour period last month? But natural gas and fuel oil prices are up substantially.

Housing prices appear to be cooling off, and larger homes are taking longer to sell (referred to as DOM — days on the market). The refinancing boom has dried up. Rising fuel costs, rising taxes, rising electric rates all put pressure on homeowners as well as commercial property owners. One client of ours, a hospital, is looking at a 60 percent increase in the cost of electricity. Ouch!

Following a five-year period of calm (May 2000-May 2005), the U.S. economy is facing a series of shocks and bumps. No one knows how much resilience rests in this economy. We may well find out shortly, if recent extreme weather events continue, with a colder-than-usual winter or extraordinary snowfalls (remember loss of time and loss of business means loss of profits).

We are currently analyzing the cost/benefits ratios for heating two empty buildings to keep the wet sprinkler system in operation, vs. converting to a dry system. At current fuel costs, it is beginning to make economic sense.

So as we hunker down for winter (several weeks earlier than usual), there is a lot to think about regarding the state, regional and national economies. For the past year or two, corporations have been holding cash rather than making capital investments and improvements to increase production or enhance and improve current operations. We need to convince these companies to reinvest and spur the economy. Time will tell.

Bill Norton is President of Norton Asset Management. In addition to his active brokerage work, he is a Counselor of Real Estate, a Fellow of the Royal Institution of Chartered Surveyors (FRICS) and on the board of the Concord Initiative for a 20/20 Vision. He can be reached at

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