DAVID LEREAH

The message delivered to Bay State Realtors last week was clear and simple: There is no housing bubble – not in New England, not in Boston, not in the nation.

“We do not have a national price bubble,” said Dr. David A. Lereah, chief economist for the National Association of Realtors. Lereah was the luncheon speaker at an educational conference organized by the Massachusetts Association of Realtors last Tuesday. The event, which featured seminars on everything from selling historic homes to contract law, drew 255 real estate professionals from across the state.

A nationally known author, Lereah said he has spent a lot of time recently assuring the media and the public that there is no housing bubble. “We have had very healthy … price appreciation,” said Lereah, emphasizing the word “healthy.”

The chief economist of the National Association of Home Builders echoed that message at a housing market press conference held on the same day as the MAR event. Price appreciation has given homeowners $1.25 trillion in capital gains on home equity in the last two years. Much of that gain has been realized through cash-out home equity loans, which have aided consumer spending.

NAHB Economist David Seiders predicted that trend will continue and disputed the conclusions of some analysts who have suggested current housing price levels might be unsustainable given past real estate cycles. Seiders said some parts of the housing market could see prices drop but that would not affect the overall market.

As a sector of the economy, housing has contributed to 68 percent of the economic growth this year. Sales of existing and newly built homes have been robust. Nationally, home prices have risen by about 7 percent this year, while the Boston area has experienced double-digit price increases.

“The housing sector has kept the U.S. economy afloat,” said Lereah, who was the chief economist for the Mortgage Bankers Association before joining NAR.

Bay State Realtors won’t be hearing the popping sound of a bursting housing bubble any time in the near future, explained Lereah. “Even if there’s inflation, there will be deflation. The bubble will go down but it will not pop,” he said.

The housing market has largely been the beneficiary of a struggling economy. Frightened by the volatility of the stock market, many people have turned to real estate as a safer, more attractive investment. The housing market has also been helped by low interest rates and favorable demographics that have fueled demand, while the supply of housing for sale has been inadequate to satisfy that demand.

In terms of demographics, the large baby boomer generation, which has accrued a lot of wealth, is either seeking to upgrade, downsize or search for second homes. Meanwhile, the boomer generation’s children are looking for their first homes. According to Lereah, Realtors will see much business from that segment in the future.

The increase in immigration in the 1980s and 1990s has also meant more home sales.

“Those immigrants are buying homes at a record-setting pace,” he said.

Concerns Remain

But Lereah’s message wasn’t all optimistic. While Lereah predicted that the housing sector will remain strong during the next decade, he said if interest rates rise “all bets are off.” Interest rates and budget deficits could rise if military spending continues to go up, especially in the face of war.

“I worry that we are heading toward a higher-interest environment if the government continues to increase military spending,” he said.

In addition, the uncertainty over whether the country will go to war and the nation’s terrorism policy will have implications for the economy and housing, he said. Specifically, the uncertainty over whether the United States attacks Iraq can affect consumer confidence, which creates more volatility in the stock market and can harm spending on big-ticket items like homes.

Lereah was one of three renowned speakers at the MAR event last week. The one-day educational conference also featured national trainers Pat Zaby and Dave Beson.

The day was capped with the annual Realtor of the Year Awards Banquet. This year’s award went to Carolyn Chodat, broker/owner of Classic Properties in Medway and Milford.

Chodat was among 16 Realtors who were nominated by local associations for the award. A panel of judges chooses a Realtor based on his or her business accomplishments and service to the local community and the Realtor organization on the local, state and national levels.

Chodat is the president of the Worcester Regional Association of Realtors and is currently serving her fifth consecutive term as a state director for MAR. She also served as MAR’s vice president of legal affairs last year.

For the last two years, Chodat has been also been an Advisory Board member for Banker & Tradesman, which entailed writing opinion columns on real estate issues for the editorial page of the newspaper.