Realtors' guru won't bear Hub bubble talk
business.bostonherald.com
By Craig M. Douglas/ Community Newspaper Co.
Friday, October 8, 2004
Rumors of a pending crash in the Bay State's housing market are ``baloney,'' a top industry economist says.
``Bubble talk is just talk - it's not reality,'' Lawrence Yun, senior forecast economist for the National Association of Realtors, told a state Realtors' forum yesterday. ``If people listened to that, they'd have missed out on the (price) appreciation that's already occurred.''
Yun predicts Bay State home prices will rise 5 percent to 7 percent next year.
The economist said most of the pricing pressure will come from the state's growing immigrant population, plus the increased buying power of baby boomers and their children - the so-called ``echo boomers.''
He also cited the state's insufficient housing production, along with historically low interest rates and an improving economy.
This confluence of events could lead to an even greater shortage of homes in the next few years, Yun said. ``When there are more buyers than sellers, you can't have price declines.''
Yun sees differences between today and the early 1990s, when Massachusetts home prices plummeted after years of sharp gains.
He said the market's current strength is fueled by a ``catch-up phenomenon,'' meaning home prices still trail income levels by historical standards.
Today's rock-bottom interest rates and a spike in salaries during the 1980s have left mortgage payments as a percentage of household income near record lows, Yun said.
State real estate experts also discount the likelihood of a market crash.
``If we're in a bubble then it's a steel bubble, because it's not bursting,'' said Judy Moore, president of the Massachusetts Association of Realtors and manager of RE/MAX Premier Properties in Lexington.
But Karl Case, an economist and real estate expert at Wellesley College, sees things differently.
With housing prices at record highs, Case predicts demand - and home prices - could soften as buyers feel the pinch from rising interest rates.
``Buyers low-ball, sellers stick (to asking prices) and volume drops - that's what I'm worried about,'' the economist said. ``I'm no more a soothsayer than the next guy, but I do think it's a pretty overinflated market.'' |
