Even without the threat of bursting bubble markets, real estate isn't invulnerable in the uncertain economy.

With a short-term economic outlook clouded by uncertainty over the possibility of war, stagnant domestic job growth, shrinking state budgets, corporate corruption and shaky consumer confidence, an economic double-dip back into recession may not leave real estate unscathed.

"What's clear is that we are not out of this (an economic downturn) yet," said Kenneth T. Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the Haas School of Business in Berkeley, CA.

Rosen was speaking along with other industry experts during the Urban Land Institute's (ULI) recent annual fall meeting in Las Vegas.

Rosen says the nation's economy has a split personality, with consumer spending, single-family housing, home mortgages, defense spending and health care as the bright side and telecommunications, technology, stocks, state governments and the airline industry as the dark side.

Stark regional differences also divide the economy with robust job growth in Southern California, Las Vegas, Miami, Charleston and Jacksonville and sluggish job creation or job loss in Northern California, Seattle, Boston, Austin, Atlanta, Hartford and Denver.

The single-family housing sector, thus far the economy's darling, faces the most risk in overpriced markets -- Washington, D.C.; Miami; Fort Myers; Sarasota; Newark; Boston; Denver; San Diego; San Francisco; San Jose; Tacoma; and Colorado Springs, according to Mark M. Zandi, chief economist of Economy.com in West Chester, PA.

San Jose is in Santa Clara County (Silicon Valley) which has already proven susceptible to downward economic pressures. With unemployment rising, home prices sank this year and local experts say they aren't expected to turn up in early 2003 as they have in previous years during the early months, after the holidays have ended and weather isn't the obstacle it is elsewhere.

Elsewhere, both the retail and for-sale housing sectors have been boosted by consumers with large equity gains. Until recently consumers have been unfazed by economic uncertainty and have had the confidence for unbridled spending.

Rosen also said capital continues to support office and multifamily markets as investors look to real estate as a way to dam up the flood of Wall Street losses.

"The capital markets are chasing real estate right now, because it is the least worst alternative," he said.

The experts also say the current economic environment should be viewed in its proper perspective.

"Keep in mind that this is a period following tremendous growth. When a vacancy rate (for apartments) that was 2 percent is now 5 percent, you feel like you've been kicked in the stomach. But a 5 percent vacancy rate is not so bad," said Lynn M. Sedway, executive managing director of the Sedway Group, a CB Richard Ellis company in San Francisco.

"People have confidence in the long-term prospects for the economy. When they buy homes, they are not acting irrationally," she added.

Other experts at the ULI meeting likewise cautioned nay-sayers to be wary about predicting too much doom and gloom in the real estate sector, which often weather's the worst economic storm.

"Consumer confidence is okay compared to the irrational exuberance" of the boom years, said Susan Hudson-Wilson, founder and chief executive officer of Property and Portfolio Research in Boston. She predicted that consumer spending and worker output will remain strong, because both are being driven by baby boomers who are now in their peak years for income earning, productivity and spending.

"While the stock market has lost $ 8 trillion, real estate has gained that much...Real estate will stay stable despite the economic slump. It's not doing anything weird, it's just performing," she said, adding that the single-family sector, for first and second homes, "is a wonderful place" for capital to flow.

"We could talk ourselves into a recession, but there's no need for it, and we shouldn't," Hudson-Wilson added.

Published: November 14, 2002

Use of this article without permission is a violation of federal copyright laws.

Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.