PETER P. CASEY
‘Steady’ in 2003

While some economic forecasts remain cloudy for 2003, those in the real estate industry are expecting relatively clear skies ahead.

Affordable housing advocates, on the other hand, are prepared for a rougher climate on Beacon Hill, as dozens of bills have been filed to repeal or otherwise weaken the state’s so-called anti-snob zoning law.

“It’s going to be an extremely challenging year given the state of the budget and [Chapter] 40B,” predicted Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association.

Chapter 40B is likely to dominate any discussion on affordable housing in upcoming months, according to Gornstein. In 2002, suburban lawmakers attempted to change the law, which allows developers to bypass local zoning in communities where less than 10 percent of the housing is deemed affordable. In exchange, builders must set aside units in the development they propose for lower-income residents.

Some of the same lawmakers who tried to change the law in 2002 have filed new bills to either put a moratorium on Chapter 40B, repeal it or substantially alter the law. While housing activists are facing this challenge, they’ll also be fighting to hold onto diminishing dollars for existing housing programs and introduce new incentives for new housing production.

CHAPA, for example, is supporting a measure that would give more education funding to local communities that produce more affordable housing and reforms that would discourage the demolition of state public housing units. But focusing on any housing proposals will be tough given the state’s budget shortfall.

“The $2 billion budget deficit will overshadow everything else making it difficult to advance housing legislation,” said Gornstein.

Realtors also acknowledge that the tight budget will keep lawmakers busy, making it harder for them to push their own agenda. The Massachusetts Association of Realtors will support legislation that instructs courts to give precedence to civil actions or disputes involving building permits and housing projects and a statewide initiative or enabling legislation that will encourage further housing development by offering density bonuses to developers.

In addition, MAR wants communities that pass building caps to provide a justified reason for enacting the building restriction and a plan to deal with the issue or problem that caused them to institute the cap in the first place.

“Caps, as much as anything else, prevent us from supplying the need of housing that the state has,” said Peter P. Casey, 2003 president for MAR.

Rating the Year

While Realtors and homebuilders will be seeking ways to increase housing production in the Bay State, industry leaders are forecasting a relatively healthy year for home sales and price appreciation. The fate of the residential real estate market, however, largely depends on the mortgage interest rates.

“A lot hinges on interest rates, at least in the majority of the market, and at the moment it appears with a little bit more inventory and stable interest rates through the first half of the year, the market should be a steady market,” said Casey, who is president of Prudential Wilmot Whitney Real Estate in Weston. “I think it won’t be a booming market like we have had, but it will be pretty steady.”

Economists for the National Association of Realtors are expecting interest rates to stay stable during the first two quarters, and predict the economy will pick up at a brisker pace during the third quarter, pushing interest rates up a bit.

The higher interest rates will mostly affect buyers searching for lower- to mid-priced homes, according to Casey, because those seeking luxury homes aren’t as much affected by interest rates as they are on the performance of the stock market.

“I think for everything in the market, other than the very high end, it should be very positive, at least in the first half of 2003,” said Casey. “Depending on what happens to interest rates in the second half of 2003, it may steady or it may dip a little bit … If interest rates go up more than 2 percent in the second half of 2003, it will probably have a chilling effect on the market. If interest rates remain stable, it should keep going.”

With the stock market “trending up with a lot of hiccups” recently, Casey said he believes that will also “bode for a much more pleasant spring season, even in that [high] end of the market.”

In addition to keeping their eyes on interest rates and home sales, Bay State Realtors will also be watching what happens with homeowners’ insurance. Nationally, the availability and rising costs of homeowners’ insurance has been a growing concern. In Massachusetts, investors and owners of multi-unit properties have started experiencing problems acquiring insurance, and according to Casey, that unavailability of insurance will be spreading to individual homeowners.

Homeowners in other parts of the country, particularly in coastal communities in Florida, are already having a tougher time getting insurance. That’s mostly because insurance companies, which have been hit by expensive homeowner claims from weather-related damage or mold problems, are seeking ways to reduce their risks and costs.

“Tornado damage, hurricane damage, coupled with the mold issues down there – all of which have been very expensive for the insurance companies – have guaranteed them losses for many years running. and the stock market has not cooperated in gaining back what they’ve lost in those claims,” said Casey. “They’re [insurance companies] doing what they can to recover, but what they’re doing is in effect reducing the availability of insurance and/or making it more expensive.”