Despite massive job layoffs, a volatile stock market and shaky consumer confidence since the Sept. 11 terrorist attacks, Bay State real estate experts are not predicting a doomed housing market.

Lower interest rates, pent-up demand for housing, a low housing supply and demographic forces may keep real estate afloat while other sectors of the economy flounder more over the next few months, according to local Realtors.

“Real estate will suffer less than some other sectors of the economy,” said Ed Shanahan, chief executive officer of the Greater Boston Real Estate Board. “Real estate is a lagging indicator of the economy. [It] is going to be one of the last sectors of the economy that’s going to be significantly impacted by any uncertainty of the economy.”

Telephones were quieter in most real estate offices throughout the state immediately following the attacks, according to Realtors, and that may have slowed activity over the last few weeks.

However, David Drinkwater, president-elect for the Massachusetts Association of Realtors, emphasized that when discussing the immediate fallout of the attacks on the real estate industry, it’s important not to be misled into thinking that it points to a long-term downward cycle or trend in home sales.

The basic fundamentals behind the real estate market – demand, a low supply, and demographics that show a baby boomer generation with housing needs – still exist, said Drinkwater, a Realtor with Coastal Countryside Properties in Cohasset.

“We have seen a quieting of the phones, but calls have been made, showings have been made,” said Drinkwater. “The demand for housing is there. People still have to have a house to live in. People still have to move because of their changing life situations.”

GREB’s Shanahan points to one example of how the housing market has fared since the attacks.

In the week prior to the attacks, 151 open houses were scheduled in the MetroWest area surrounding Boston. During week after the attacks, 116 open houses were scheduled in that area. One week later, 107 open houses were scheduled.

Shanahan said that given how “frozen” the nation was after the attacks, there wasn’t a “precipitous” drop in home showings and open houses as one would expect.

For the last several months, strong home sales appeared to be the one bright spot in the slowing economy – even as the residential real estate market softened a bit.

“Real estate seems to be keeping the economy buoyant,” said David M. Walsh, MAR president and broker-owner of David Walsh Realtors in Weymouth.

Given recent job cuts and the erosion of the stock market, Walsh acknowledges that consumers may be “apprehensive about spending money.”

But Walsh said he has not yet seen that apprehension spreading into the real estate market. Further, with October typically a “robust” month for brokers, Walsh is optimistic that activity will pick up.

Both Walsh and Shanahan also said it’s important to consider the cyclical nature of real estate when talking about sales trends. Any drop in activity during late fall and early winter – especially closer to the holidays – is expected because those months are typically slower. Early autumn and spring are usually the busiest seasons for real estate agents.

Price Adjustment
Overall sales of existing homes have been pretty steady in Massachusetts and across the country this year. Most brokers in the state will consider 2001 as a very successful year in terms of real estate sales, said Drinkwater.

In fact, sales of existing condominiums and single-family homes were higher in most parts of the state through August of this year compared to the same period last year.

At least seven counties in Massachusetts had higher homes sales during that time, according to Warren Information Services, a sister company of Banker & Tradesman that collects home sales statistics from the state’s registries of deeds. For the first eight months of the year, home sales slipped in only three counties – Barnstable (-12.2 percent), Nantucket (-26.8 percent) and Norfolk (-1.9 percent).

In Middlesex County, home sales plunged 26 percent from January through June, the most recent month for which WIS has collected data.

Likewise, homes sales statistics for Essex County are only available through June, and for Plymouth and Suffolk counties through July. But according to WIS data, all three of those counties experienced more home sale transactions in 2001 than during the same period a year ago. In all, based on the most current year-to-date information, 10 of the state’s 14 counties have seen sales activity pick up in 2001 compared to 2000.

Along with more sales activity in Massachusetts, home prices also increased. Median prices for single-family homes jumped more than 14 percent in the Bay State for the first half of the year, according to WIS.

In Suffolk County, median prices for single-family homes escalated more than 20 percent during the first seven months of the year.

“We’re going to see a slowing in the rate of [home] appreciation in the coming months,” said Drinkwater. “We’ve had tremendous appreciation in real estate prices over the last several years. That pace is going to slow down. But prices won’t be deteriorating.”

Prices will continue to climb at a more modest rate, predicts Drinkwater. However, Drinkwater said he does not believe the slower appreciation rate is directly linked to the attacks

“That was naturally happening,” he said.

On a national level, sales of existing single-family homes are starting to slip after record sales in August.

Existing-home sales rose 5.8 percent in August to a seasonally adjusted annual rate of 5.5 million units – 5 percent higher than the same period last year, according to statistics from the National Association of Realtors.

NAR reported last week that there was a downturn in existing-home sales following the terrorist attacks, and the group also predicts that sales will be lower than previously anticipated in the months ahead. Yet NAR leaders said there are factors – like low interest rates and strong household formation – which point to a housing upswing next year.

GBREB’s Shanahan agrees that one big factor improving the outlook for home sales is the low interest rates. The Federal Reserve has slashed interest rates eight times this year, including the half-point cut following the terrorist attacks.

“Some of the [economic] uncertainty has been offset by good interest rates,” Shanahan said.

And the real estate market may also benefit by people who see real estate as a “safer” investment in comparison to the stock market, Shanahan said.

“Real estate becomes that much more appealing” when the stock market is in trouble, said Shanahan.

In addition to home sales, the rental market will also affected during these tough economic times.

Shanahan said the apartment vacancy rate in the Greater Boston market has crept up to between 4 and 5 percent – higher than the vacancy rate of the last five years, which hovered at between 2.5 percent and 3 percent.

That vacancy rate is still relatively low, according to Shanahan, but the fact that more apartments are empty means that fewer landlords will be willing to increase rents at this time.

The economic uncertainty and tough job market could also mean that young people in search of a home may instead choose to live with their parents or family members longer or opt to split rent with several roommates, explained Shanahan.

But students are still flooding Greater Boston neighborhoods, and there hasn’t been a significant increase in the rental supply, he said.

“The rental demand is still strong,” said Shanahan. “I think the president’s call to get on with our lives and return to normalcy – that appears to be resonating.”