Edwin J. Shanahan – Housing demand strong
Out loud, Realtors may be asking, What recession? But in quieter tones, Bay State real estate professionals are acknowledging that the year ahead is filled with uncertainty.
That’s not to say that the year 2002 will be terrible for home sales and prices. This year is not likely to be disastrous for the housing market, according to real estate professionals, but it probably won’t be as robust as it was in the prior three or four years.
The good news, they say, is that because there has been so much pent-up demand for housing, home prices are not likely to take a steep dive.
As with other industries, the fate of real estate will hinge on the overall economy and how long the recession lasts. With many economists predicting that the recession will be short and shallow, Realtors are remaining fairly optimistic.
Affordable housing advocates, builders and Realtors are also anxiously awaiting the outcome of the omnibus housing package, which includes recommendations to change the state’s anti-snob zoning law, or Chapter 40B, a $508 million bond bill for public housing and other bills. The proposed legislation is currently in a House-Senate conference committee.
With the state’s fiscal picture already clouding up, many fear that money for affordable housing programs will disappear.
It’s going to be much more challenging to obtain adequate funding because of the economic downturn, said Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association.
Bay State Realtors, on the other hand, recently have been buoyed by some positive signs. Home sales in November and December, a time when sales activity is typically slow because of the holidays, were strong.
The fact that we are seeing as much activity [from] Thanksgiving to Christmastime – late November to the end of December – that’s a strong indicator that we’re going to open the year with a very good beginning, said David S. Drinkwater, the new president of the Massachusetts Association of Realtors.
At least from our point of view as real estate professionals, the activity that we’re seeing right now does not suggest a recession in our business, said Drinkwater.
Taking into consideration the recent rise in consumer confidence, Drinkwater predicts that the first half of the year will be good. At Drinkwater’s own real estate company, Coastal Countryside Properties in Cohasset, several sellers have already signed contracts to put their homes on the market this month.
My sense is that there will be a nice influx of inventory on the market probably in the early part of the 2002, which I think will add to the demand out there for what we’re seeing, he said.
Demographics are also key, according to Drinkwater. The baby boomer population – encompassing those born between 1946 and 1964 – is large, and those in their mid-40s are most likely to make the major investment decisions, such as buying and selling homes, said Drinkwater.
That will keep demand up and home prices holding steady.
We still expect appreciation in the market but we don’t expect appreciation at the same rate, said Drinkwater. I think it’s going to be leveling off some so that we’ll be looking at single-digit appreciation in the year vs. double-digit appreciation.
‘Insulated’ Market
While Realtors are wondering how long the recession will last, some predict that housing will weather the storm better than other industries. They also say they’ve learned some lessons since the recession of the early 1990s, when lenders weren’t as cautious and looser with money for development projects. Developers, builders and Realtors are using these lessons so that real estate doesn’t suffer.
We’ve taken a much slower, more methodical approach to development during this most recent boom, which is something we hadn’t done in the boom of the ’80s. And that’s really the big difference, said Edwin J. Shanahan, chief executive officer of the Greater Boston Real Estate Board.
Shanahan echoed Drinkwater’s thoughts on the pent-up demand for housing and demographics as driving force behind the demand.
With demand having been so strong for so long, and the need for increased production both in the for-sale and rental market, I think the housing market is somewhat more insulated from the economic downturn than other industries clearly are, said Shanahan.
Although a lot of people are leery of what’s on the economic horizon, the fact remains we still have a good strong job base in Massachusetts, he said. The demographics are such that there will continue to be a need for housing in Massachusetts – both for-sale and rental.
Even if the economic picture continues to erode and some major companies make more cuts and layoffs, Drinkwater believes that housing will survive better than other economic sectors.
I think to some degree that’s going to impact all sectors of the economy if that’s [a deeper recession] the case, he said. But because there has been such a demand for housing in the market, basically demographically driven, I don’t see that that’s going to turn the real estate market into a recession-type market itself, he said.
In 2002, MAR wants to continue raising public awareness about the need for more affordable housing and also to emphasize the group’s role as key advocates of private property rights.
That’s why MAR leaders will be pushing state lawmakers to look at how local communities are using Title 5 septic rules to restrict development. For the last few years, MAR has been pushing state legislators to adopt a uniform Title 5 code for septic systems.
Under current law, communities can override the state code and enforce stricter rules, and homebuilders and real estate experts argue that some towns are using those regulations to deter residential development.
In a similar fashion, homebuilders and affordable housing advocates will be keeping their eyes on what happens to Chapter 40B – what some refer to as a key tool for more housing production.
Of course, all of this will be centered around one of the biggest events in 2002 – the gubernatorial election.
Gornstein said CHAPA will encourage candidates for the corner officer to address affordable housing issues and will host a forum for them this year.
All the while, the advocacy group will be fighting to protect existing housing programs and monitoring foreclosure rates.
There’s going to be continued pressure to cut the housing programs as well as human service programs, said Gornstein.
Gornstein said even though there hasn’t been a significant increase in foreclosure rates, advocates want to focus on foreclosure prevention – helping people from losing their homes – particularly if the unemployment rate spikes.
