Like the oil crisis impacted the economy of the 1970s, airlines are front and center of what could be the first recession of the new century. Like oil heated our homes, airline travel helped heat our economy. Thanks to the terrorist attacks on our nation, people don't want to fly, which is impacting airline profitability to the point of a government bailout. The industry is expecting massive layoffs, as many as 100,000 employees.

It's yet another major factor that is wreaking havoc with the American economy, from the stock market to the real estate market. While it is difficult to separate the impact of airline layoffs from the general fear of recession, some Realtors are already feeling the squeeze.

When Boeing announced over 20,000 to 30,000 layoffs, it reached parts supplier Lockheed in Bethesda, Maryland. The Washington D.C. area is also the hub for Arlington-based US Airways, which has been grounded due to the closing of Reagan National.

"If Reagan is closed permanently, which is a distinct possibility, US Airways will probably go under because that's where most of their flights originate," says Lenn Harley, a Bethesda, Maryland broker.

US Airways, which has about 8 percent of available seat-miles, according to a news report, will receive about $400 million in the government bail-out.

"We have seen some slowdown here," Harley says. "For instance, we've had a couple of first-time buyers saying they are going to "wait". One of our agents visited a luxury new home model yesterday and the builder's representative commented that he, our agent, was the first person to visit their community in a week.

Minneapolis/St. Paul is the hub for Northwest Airlines, where a planned 20 percent cut to 10,600 jobs will affect about 4,200 families in the Twin Cities.

"That's a big hit, but we have 2.4 million in our metro area, so it is a relatively small employer group but airline jobs are good paying jobs, and it will hurt," says Realtor Mary Leizinger.

"We have a diverse economy - financial services, insurance, food companies, and large corporations, that will help keep our economy more insulated," she says. "There is some fear, but not as much hesitation as the last couple of weeks.

Realtor Don Rasmussen says, "I think it has shifted to a buyers' market, or maybe we should say that it has ceased to be as strong a sellers' market. The upper bracket has gone away, and homes are selling at a more normal market pace - 60 to 90 days."

Leizinger says a softer market could be beneficial for some home buyers who have been disadvantaged by a rapidly appreciating market. "We have a shortage of entry level housing, first-time homebuyers couldn't find anything under $250,000. A more balanced market could also allow some seniors and people who need to buy on contingency to get back in."

Numerous other markets are also affected including American Airlines hub Dallas/Fort Worth, where 20,000 layoffs will begin.

How much impact can one sector have in a local economy? Mark Dotzour, chief economist for The Real Estate Center, Texas A&M, says that one factor to consider is how long will the layoffs last.

"I don't know how long it will take to get back in the airports," says Dotzour. But the key to homesales volume in any local market are interest rates, home price appreciation and job growth."

"Right now, you have mixed impacts," he explains. "Falling interest rates are fueling demands for houses even in the face of falling job markets. Price appreciation correlates with home volume. If prices go up, volume goes up, and over the last couple of years, that creates equity for homebuyers which allows them to move up. The third factor which has significance is job growth.

"As job growth continues to decline into the negative, it will have an impact on homes sales volume. But the interesting thing is, in Dallas, with all the blow out in Internet and telecom, Dallas has 3 percent more jobs than a year ago. Houston survived the oil and gas slowdown and will close out 2001 with record sales. There is a lot of positive momentum because the mortgage rates are the lowest in a long time. That makes larger homes and nicer neighborhoods available to people who couldn't afford them four years ago."

"The amount of inventory of homes has risen somewhat, but the curious thing is the months of inventory for entire state is 5.3 months, up from 4 1/2 months from the first of the year - that is substantially lower than it was in 1995, when inventories were at 8 months. Inventory levels have gone from rock bottom and they are still low. We are just getting to the point where there is more than one home for a buyer to look at in their price range."

The bottom line is perspective. "Don't focus on what happened last week and forecast it for the next five years, whether it is good news or not," advises Dotzour.

Published: September 24, 2001

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.