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Suburban housing market has seen its ups and downs

January 29, 2006

On Jan. 1, Sharon real estate agent David Wluka became president of the Massachusetts Association of Realtors. Globe reporter Kimberly Blanton spoke with Wluka, owner of Wluka Real Estate Corp., about the suburban housing market.

Q: Why did suburban home sales, which started well in 2005, drop sharply during the fall?

A: It was one of the best years in Massachusetts history. It was that the market had finally peaked. If you go back to 1995, except for a couple of blips, we've had continuous growth for 10 years. Back in '95, the annual number of sales was approximately 43,500 units. In 2005, it was about 72,000.

Q: What triggered the slowdown?

A: Part of it was the economy. There was also some unrest: oil prices, situations in the world, and the fact the Fed began to raise interest rates. But if anybody has a sense of history, the rates are historically low. As someone who sold houses at 9 percent, 10 percent, 11 percent interest rates -- or even 18 percent -- I think 6 percent is pretty good.

Q: While sales fell only slightly last year, the biggest change was a spike in inventory. What happened?

A: It's a return to normalcy. Historically, 7 1/2 to 8 1/2 months of inventory, like we have now, was a steady, normal market. You didn't have people overbidding on houses, overpricing houses in a very hot market, and people buying houses to speculate. In a normal market, people buy homes when they need to or when their house is too small.

Q: Why was the market change last fall so dramatic?

A: The market fell sharply because people weren't sure as to what was going to happen. When the talk of the bubble came out, some didn't know what to do so they stopped. Perception more than reality caused that to happen. I'm seeing in the experience I'm having since the first of the year and in talking to other agents [that] everyone's busy.

Q: Do you worry about how high house prices have become for buyers?

A: We have the highest cost of living in the country -- we even beat out San Francisco, according to the National Association of Realtors. We have lost population two years in a row. People in the 18-to-40 demographic are leaving, and we're losing our doctors, our engineers, and their support people to other parts of the country where they can have a similar quality of life for a lot less.

Until we begin to produce more housing, we're going to continue to have a brain drain and a talent drain. We're also losing our service people -- they're driving hours to get to work.

Q: What is your prediction for 2006 sales levels and prices?

A: I don't think we'll hit 2005 sales levels. But if in fact we had as much as a 10 percent drop from last year's sales -- and I'm not saying we are -- it would still be the third-best year in history. I think it'll be less than a 5 percent drop. Prices will probably either be flat or rise moderately.

Q: Should homeowners be concerned home values will fall?

A: They have to have the long-term view. If they're comparing what their houses are worth now versus last year, they may very well be less. But if they go back two or three years, they'll find the appreciation is there. The longer you look back, the higher rate of appreciation.

Q: Tell us about your own home-buying history.

A: I bought my first house in 1972. I lived there until 1979 -- I remember the Blizzard of '78 in that house. I built a new house and lived there 20-odd years. I had an opportunity to downsize and buy some lakefront property in Sharon on Massapoag Pond. Now I have a house for my extended family -- they're all in town.