This is a partial transcript from Your World with Neil Cavuto, August 14, 2001.

NEIL CAVUTO, HOST: No wonder why people are sprucing up their homes. It’s turning out to be a pretty good investment. Take a look at this. Numbers just out show the average price of an existing home is nearly $150,000. That is 6 percent more than last quarter. It is a lot more than that in other parts of the country, and a heck of a lot higher than stocks or bonds or diamonds.

Proof that your home is your castle, in more ways than one. How long is this going to go on? I thought I'd go to the expert, Peter Burgdorff is his name. Peter is the president and CEO of ERA Realty. Peter, good to have you.

PETER BURGDORFF, CEO, ERA REALTY: Nice to be here, Neil.

CAVUTO: How long will this go on?

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BURGDORFF: For ever.

CAVUTO: You hope.

BURGDORFF: We’ve been in the longest we’ve been in the longest real estate expansion strong market that we have ever been in. I think the danger is to think that it will last forever and it won’t. This business is cyclical. It always has been and always will be. I think the real controversy is, what does the cycle look like?

CAVUTO: Yeah.

BURGDORFF: I contend that it is a longer, gentler cycle for lots of reasons.

CAVUTO: Your history in this business is one that suggests sometimes it isn’t so gentle, the changes can be dramatic. In the late 80s experience, home prices collapsed. Do you see anything like that happening?

BURGDORFF: I think the current expansion is built on solid fundamentals. It is not a speculative market. It is a strong economy, the low employment numbers, the good interest rates, the demographic issues, the immigrant issues, all of that and it is just a supply and demand thing.

CAVUTO: That’s a very important point. Builders do not appear to be throwing up a lot of houses and condos like they did years ago.

BURGDORFF: You look back at the mid 80s and it was a highly speculative market. People were buying houses, not because they wanted a home, but because they could flip it and make a lot of money. Builders were putting up anything anywhere and selling them for a lot of money. You had all the speculation them the tax law changes and the whole thing comes back.

CAVUTO: But they are still selling for a lot of money. This is a recent chart of median home prices. This is rather surprising, because depending on where you’re going, these are some market numbers.

Obviously San Francisco, that is a pricey area. That is half a million dollars for essentially a closet. Now, switching to the other one, this is interesting showing the growth in what is happening here, Up almost 24 percent in Sacramento. Washington up about 18 percent. California occupies a lot of this here. Northern California, 15 percent. Parts of the Northeast, Bergen-Passaic in New Jersey up 17 percent. It can’t keep going like that, can it?

BURGDORFF: No, it can’t and it shouldn’t.

CAVUTO: When will it change?

BURGDORFF: We’re seeing some softening.

CAVUTO: Where?

BURGDORFF: In the markets that are very, very hot. I talked today to someone in the New Jersey market, our area company there, our area company down in Washington D.C.

CAVUTO: When you say soft, what are the first signs of a soft market?

BURGDORFF: That you are not getting 12 multiple offers on a house the second day it’s on the market.

CAVUTO: In other words, homes will stay for sale a little longer?

BURGDORFF: They are staying on for a couple weeks, a couple months. The challenge is every market is different and different price ranges within a market are different. But we are seeing especially in the upper ends of the market where ever that is in whatever the market, we are seeing things staying on a little bit longer. We’re seeing a little bit more inventory. I would still describe it as a good, strong market. It’s not frenzied market, which has driven these double digit price increases.

CAVUTO: Could this be something else? People who might have looked to stocks or bonds or hard assets in the past are looking now to real estate and that that will provide the floor here for not falling out...

BURGDORFF: Absolutely.

CAVUTO: Your worst enemy could be these markets picking up.

BURGDORFF: I think that one of the reasons why the real estate market has been saying so strong longer thank the rest of the markets out there is that very fact, that people are switching their money out of the stock market and putting it into the real estate.

CAVUTO: And the proof is in the putting, they are putting up more money up front, right?

BURGDORFF: We are seeing larger down payments which is an indication that will happen. At some point that has got to slow down. But that factor and all the other factors that have built this market and especially the demographics and the fact that we stopped making new land a while ago...

CAVUTO: You’re kidding me?

BURGDORFF: Now the prices will really go up, right? I think we are going to see a much softer tailing off than we’ve seen.

CAVUTO: What about the people that say hell, I am selling my house so fast, I don’t need the Peters out there. I can do it on my own.

BURGDORFF: And some can, and some luck out and do great. Obviously in a very strong market you see more for sale by owners than not. The challenge is, especially as it is coming down a little bit, there are so many factors involved and pricing being key, talking to one of our brokers today and she said that pricing is particularly sensitive right now. And the stuff that’s priced right is selling very quickly and almost at asking price.

CAVUTO: But some home owners get greedy.

BURGDORFF: Well you try to get greedy and you put it up a little bit, it sits on the market for a month or two and then everybody says wait a minute, that’s been on for a while, it must be a dog. I am going somewhere else. I wouldn’t take the risk, personally.

CAVUTO: That’s surprising coming from where you were. Peter, thank you very much. Peter Burgdorff is the president and CEO of ERA Franchise Systems.

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