Mass. Housing Market Weathering Economic Slump
By Sarah Sparks
WASHINGTON – Like most industries, housing has taken hits from the recent terrorist attacks and weakening consumer confidence. But if you are in the market for a house, don’t expect home prices to drop anytime soon. Housing sales and construction are holding up better than expected, economists said at a National Home Builders Association panel here Tuesday.
“Yes, we are in a modest recession,” said David W. Berson, vice president and chief economist for Fannie Mae, “but we are in the smallest housing downturn of any postwar downturn.”
The housing market took a dip immediately following the Sept. 11 attacks. From the week of Sept. 6 to the week of Oct. 17, the Mortgage Bankers Association of America ‘s seasonally adjusted Mortgage Purchase Index was down 6 percent. Likewise, the National Association of Home Builders’ Housing Market Index – derived from a survey of sales of single-family homes – dropped 14 percent from September to October.
On the other hand, the housing industry has been buoyed by inventory and mortgage rates hovering near 30-year lows.
“Homes are still appreciating at 3 to 5 percent” a year, said David M. Walsh, president of the Massachusetts Association of Realtors and owner of David M. Walsh Realtors in Weymouth. “They may go up more modestly than before but รก there will always be people buying homes, regardless of the market.”
For the third week of October, the 30-year fixed-rate mortgage averaged 6.61 percent; the 15-year rate sunk to 6.09 percent; and the one-year adjustable-rate loan hit 5.26 percent, as the Federal Reserve encouraged wary buyers to head to weekend open houses again. Moreover, Berson, along with David F. Seiders, chief economist for the National Association of Home Builders and David A. Lereah, chief economist for the National Association of Realtors, predicted that the Fed would lower rates another quarter-point during each of its next two meetings.
“[Mortgage rates] have been one of the key cushions in the housing sector,” Seiders said, adding that uncertainty in the stock market also has made banks invest more in the home loans and construction. “We have good reason to expect a rebound. By the second quarter next year we’re looking for very strong activity.”
Realtors have already returned to 95 percent of their pre-Sept. 11 business, Lereah said, though buyers seem to be going back to basics and high-end housing may take longer to recover.
Martin Edwards Jr., president-elect of the National Association of Realtors, said there is still a housing shortage in many areas that has helped keep home prices high regardless of the market. “The supply and demand mismatch will be national and long-lasting,” Edwards said, “which will put upward pressure on housing prices for years to come.”
That’s good for homeowners, he said, but has put strains on those looking to buy a home. Walsh agreed, saying that in the tight market there have often been multiple offers on any given property. “Buyers have been put into that bottle of having to make an instant decision,” he said.
Houses are staying on the market an average of three weeks, Walsh said, but he has seen a slight increase in houses in the Massachusetts market during the past month and thinks sales will be good in the long run.
“Buyers aren’t in a situation where it’s ‘Oh my gosh, I have to grab my checkbook this second,’” he said. “It [the slowdown] has given them more time to look at what’s out there.”
