Brittle bones of the busted boom
Expanded from the 3-12-2006 Daily Sparks (Nev.) Tribune

Gee, I hope I'm wrong and the experts prove right. The jury's still out but the heavy hitters seem to be weighing in against market-based street smarts.

On Feb. 26, I published a worrisome comparison compiled from a Sunday edition of the Reno Gazette-Journal: newspaper space selling real estate exceeded that devoted to employment ads by more than five to one.

I dropped an e-mail to EDAWN for some perspective on what may be proof that even the frothy Nevada real estate bubble is going flatter than a fritter on a frosty morning.

Chuck Alvey, executive director of the Economic Development Authority of Western Nevada, replied "I'm sure I can't definitively answer the question you pose. However, methods for finding both employees and jobs have expanded well beyond print want ads into networking, online and the like. In addition, we do have a number of 'early retirees' from California and elsewhere, but I suspect many are not done with their work lives. However, many are not likely seeking traditional jobs in traditional methods."

Last Wednesday, the local chapter of the Associated General Contractors staged an economic roundtable entitled "Construction Outlook." As might be expected, labor and material shortages were the hot topics. But the assembled oracles also tippy-toed and pooh-poohed fear of a housing bubble, currently the largest undomesticated 800-pound gorilla in the domestic living room.

Nevada State Bank CEO Bill Martin said "Vegas has a chance of declining more than Reno. I think the median (housing) price there has already fallen about one percent. But is there a bubble? I think as long as people want to live in Nevada, there isn't one."

Ken Simonson, chief economist of the national AGC, predicted that an uptick in non-residential construction would offset the current slowdown in housing. That was Wednesday.

Last Thursday came these chillers from the Associated Press: "End of five-year housing boom ripples through economy" and "30-year rates jump to highest level in 2-1/2 years."

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What, me worry?

"The backlog of unsold new homes hit a record," AP reported.

Okay, I'm worried.

Such a situation screams for that shameless hussy of sexy spin, Ms. Rosy Scenario: "Still, the prospect of a housing slowdown appears less frightening than it did a few months ago, according to those who track the industry," AP calmly cooed.

"There seems to be little concern that a much-touted housing bubble will lead to a collapse in sales and prices. New Federal Reserve Chairman Ben Bernanke said last month housing would enter a moderate slowdown but not a crash."

Hmm. The cheerleaders are rooting for the home team and that's considered credible commentary.

At least one economist seems immune to Rosy's siren songs.

"Asha Bangalore, an economist for Northern Trust Co. in Chicago, estimates that housing created 43 percent of all new jobs from late 2001 until mid-2005," AP reported.

"That included the obvious, such as jobs in construction and mortgage services, but also retail and service jobs that were created because consumers tapped their rising home equity to buy more things."

Bangalore added that "the housing slowdown that we are seeing is very modest, not alarming, but I think the ripple effects are going to be enormous because of the employment factor."

Lemme see, does anything locally resemble that remark? Oh, yeah: 19.5 pages of real estate ads vs. 3.65 pages of job openings in the Feb. 19 edition of the major newspaper in this area.

If businesses vote with their dollars and market forces are the holy grail, then the adjustable rate mortgage on the House of Mammon just got called.

CASSANDRA KRUGMAN. The guy who started this gloomy buzz, New York Times columnist and Princeton University economics professor Paul Krugman, wrote this on May 27, 2005: "By the summer of 2003, private-sector employment was three million below its 2001 peak. And the job losses would have been much worse if the stock bubble hadn't been quickly replaced by the housing bubble…The question is what can replace the housing bubble…If housing prices actually started falling, we'd be looking at a very nasty scene in which both construction and consumer spending would plunge, pushing the economy right back into recession," Krugman warned.

CALL THE DOCTOR. I got a call from a friend fresh out of dental surgery.

"I'm so mad I can't see straight," she said. Her oral surgeon is preparing her for a set of china clippers, but she may have to suffer six months of toothlessness thanks to recent revelations about side effects of Merck's popular bone-strengthening drug Fosamax.

It seems that her dentist just returned from a national conference where attendees were warned about complications allegedly caused by the heavily advertised drug. Among them are depressed immune systems and slowdowns in healing, two things of great concern to the lady who called me.

While we were on the phone, I googled "Fosamax, osteonecrosis" and got back 67,300 returns. (Osteonecrosis means "bone death." While you're still alive.)

A year ago, USA Today reported that "Over a three-year period, the jaws of dozens of patients who had undergone oral surgery at (Long Island Jewish Medical Center) had failed to heal properly. Part of the jawbone had died and become exposed….Further investigation revealed one common thread: All of the patients had been treated with at least one of a class of drugs called bisphosphonates."

That includes two popular oral versions, Fosamax and Actonel, as well as intravenous applications which seem to cause even more troubles.

One sure sign that this is going to be big: all the legal websites devoted to this issue. It seems that Nevada, as usual, got the word later than most other places, much to the worry and consternation of my phone caller.

Now, if Merck could just come up with a safe version of Fosamax to shore up the brittle housing market…

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Copyright © 1982, 1996, 2004, 2005, 2006 Andrew Barbano

Andrew Barbano is a 37-year Nevadan and editor of Barbwire by Barbano has originated in the Daily Sparks (Nev.) Tribune since 1988.


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