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COPYRIGHT 2002 All rights reserved. Reproduced by permission of The Condé Nast Publications Inc.
On July 8, 1949, the Long Island Star Journal published a full-page ad for a community of affordable homes that the developer Levitt & Sons was building on a tract of farmland near Farmingdale, about twenty miles east of Queens. The ad featured an eight-hundred-square-foot ranch house on a sixty-by-one-hundred-foot plot. "This is Levittown! All yours for $58!" a month, the ad read. "Practically everything you can think of is included in that price. Refrigerator, range, Bendix, Venetian blinds, General Electric oil burner, legal fees, appraisal charges--yes, sir, the whole works are in." Prospective buyers could choose from five slightly different models, which were all priced at $7,990. If they were former G.I.s, as most were, the government guaranteed them a mortgage, with no down payment.
As recently as the summer of 2000, there were houses for sale in Levittown for under two hundred thousand dollars. After the Nasdaq crash of April, 2000, prices fell for several months in a row, and Richard Dallow, the owner of the Dallow Agency, one of Levittown's leading real-estate agents, thought that the long-predicted property slump had arrived. He had to reduce the price of one house from $199,000 to $189,000, and then to $179,999. It finally sold for $177,000. But in the fall of 2000 buyers returned to the market. To Dallow's surprise, prices kept rising right through the recession that began in March of last year, through the aftermath of 9/11, and through the first nine months of this year. "If we could buy that house for two hundred thousand dollars today, we'd grab it in an instant," he said. "Today, that same house would probably be in the two-hundred-and-seventy-five-thousand-dollar-to-three-hundred-thousand-dollar range, and it would go quickly."
Richard Dallow's family has been selling real estate in Levittown since 1951, when his father, Ted, moved there from Queens. Dallow has lived through several real-estate booms since joining the family business, in 1971, but the endurance of this one has stunned him. During the 1990-91 recession, house prices in Levittown fell by about a fifth, and they remained steady for several years. Dallow expected the current recession to cause a similar downward adjustment, but instead houses keep getting more expensive. "It has to impact at some point," he said. "But, then again, in the summer of 2000 I thought it was impacting, and then things came back."
By and large, the kinds of people buying houses in Levittown are the same as they have always been: cops, firefighters, janitors, retail workers, and others to whom fifty thousand dollars a year is a good salary. But now many of them have to apply for jumbo mortgages--loans of more than three hundred thousand dollars--which used to be reserved for the well-to-do. "Levittown has always been a low down-payment area," Dallow explained. "If the price is three hundred and thirty thousand and you put down five per cent, that's a mortgage of three hundred and thirteen thousand five hundred. You need a jumbo mortgage. For Levittown."
A few years ago, it became fashionable to deny what was, in retrospect, perfectly obvious: a speculative bubble had developed on Wall Street. Instead of warning investors to go easy, bullish analysts came up with increasingly outlandish justifications for stratospheric stock prices: the death of inflation; the rise of the Internet; a productivity "miracle"; the end of the business cycle; the aging of the baby boomers. Such rationalizations aren't heard much in connection with the stock market these days, but similar arguments are becoming prevalent in discussions of real estate. "The single-family housing market is not in a bubble, and I don't think it is susceptible to a bubble," said Frank Nothaft,...
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