Brokers who are helping sellers understand true market values, such as those who wrote to Readers Forum Oct. 27 and Nov. 3, are doing their clients, and the region as a whole, a service. Home sales will only increase if the realities of current market prices are recognized; it is the decrease in sales activity and new construction, rather than decreasing or stabilized prices, that has inflicted so much harm.

The cover of Newsweek a few weeks ago proclaimed "The Real Estate Bust," and falling Washington area home prices have become a hot topic for cocktail parties and news articles alike. Lost in all this hullabaloo is the little-recognized fact that many area residents are helped -- and most others are not hurt (except on paper) -- by the easing of housing prices that we have experienced.

Who is helped by housing price stabilization and decline? Of metropolitan area households, 42 percent rent, and many of them would prefer to buy. A few years ago, the media were, correctly, lamenting that many households were being priced out of the housing market, while others were subjected to excessive property tax increases. Ironically, now that prices have dropped, no one is applauding and those who would like to buy are too scared to do so.

Housing prices will undoubtedly rise again, although not as fast as in the past. After all, real estate is highly cyclical, the underlying Washington economy is sound (despite the current recession) and additions to housing supply are down dramatically. Nobody wants to buy before prices have reached bottom, but renters who wait too long may once again find themselves priced out of homeownership.

Many of us continue to be concerned that high housing prices in the area will discourage the in-migration of workers the region will need to thrive during the '90s. Therefore, improved housing affordability is positive for the area's economy overall. The Dallas economy, which was in the tank a few years ago, is now relatively prosperous, partially because of companies attracted by low real estate prices.

Who is hurt by housing price decreases? The great fallacy is that the vast majority of homeowners are hurt. In fact, most have already enjoyed dramatic home price appreciation, and few that bought recently need to sell during this down period in the housing price cycle.

In a representative neighborhood in Bethesda, typical prices for three-bedroom colonials built in the 1940s were $30,000 to $45,000 in the 1960s and $40,000 to $75,000 in the 1970s. By 1980, they had risen to $150,000-$170,000; by mid-1986 they had climbed to $215,000-$230,000; and in spring 1989 they peaked at $380,000-$390,000. Few homes have sold recently, but they generally will not sell quickly for more than $300,000-$330,000.

Over 87 percent of homeowners in the neighborhood paid less than $300,000 for their house and could sell it for a profit -- in most cases a substantial one even after inflation. Almost 77 percent paid less than $225,000. Yet most owners in the neighborhood are distressed by the price declines and few would consider this a time to move voluntarily (even the same owners that would have been delighted with a sale price of $225,000 four years ago).

Of those who want or need to buy, many are buying another house in the Washington area and will find the price they need to pay has moved in tandem with the one they are selling. However, the same household that is insisting on price reductions when negotiating to buy a house is reluctant to sell their house at the reduced prices that their potential buyers are demanding.

So who is hurt by housing price declines? Just the small fraction of homeowners who bought during the past 2 1/2 years, must sell in the near future, and are not planning to buy immediately or are moving to an area that has very different housing market conditions. Retirees who had been planning to sell their homes and move out of the area will not be making as much as they had banked on one or two years ago, but they will, in almost all cases, have profited handsomely from housing price appreciation during their homeowning years in the area.

(Owners in the representative Bethesda neighborhood who bought for $30,000 in 1960 or $60,000 in 1972 could sell easily in today's "depressed" market for $300,000, a 900 percent or 400 percent profit, respectively, before inflation. Even after inflation the return has been superb, particularly after taking account of income tax benefits.)

Home builders and land developers who bought expensive homes, or built many homes in advance of selling them, have been hurt badly, although home builders in general have been harmed less by the decrease in prices than by the slowdown in the pace of sales that price changes have helped to cause.

Indeed, it is this slowdown, rather than the decrease in prices, that has hurt almost everybody in the region. Factors such as a softening local economy and uncertainty about the Middle East situation have certainly contributed to the decline in sales activity. However, it is ironic that this stagnation is attributable both to price increases that froze too many buyers out of the market and to panic about the price decreases that followed.

Potential first-time home buyers see a stagnant market and are afraid to take advantage of bargain opportunities. Homeowners who would be happy to sell their house (even at a lower price than their neighbor did last year) and buy another one (at a similarly reduced price) have great difficulty selling their house. This has slowed new housing construction and transactions, with adverse effects on local tax revenues and employment in construction, brokerage and development companies, architectural firms and all of the companies that benefit indirectly from these workers' earnings. The housing market stagnation also threatens the viability of local financial institutions, builders, developers and associated trades and services.

The stagnant market can only be revived if potential sellers adjust to the reality of current market prices, and I congratulate brokers who are helping them to make this psychological adjustment. LEONARD BOGORAD Partner, Robert Charles Lesser & Co. Washington

The outraged replies to my Oct. 20 letter, "Agents Are Bullying Home Sellers," are a good illustration of why it has been a struggle of more than 20 years to make arms-length negotiations between home buyers and sellers a reality. SARA {Single Agency Realty Association Inc.} is a nonprofit association spearheading a national movement to educate consumers about their rights and options in what may be the most important financial decisions of their lives. This is hardly a petty matter, nor self-serving either, since my services are unpaid.

So that consumers will not be more confused than they already are, some of the statements made by my critics must be addressed.

1. "The real estate professional's creed is to assist the seller in getting the best possible price for their home."

It's the law that says the broker's duty is to give undivided allegiance to the client, who may be either a buyer or a seller. This means upholding the client's best interests in all matters, not just price. When the client is the seller, the broker or his subagent, the salesperson, is forbidden by law to represent the buyer at the same time. To do that is to breach the fiduciary duty to the seller. There are no legal or ethical restrictions preventing the buyer from becoming the client of a broker.

SARA promotes the rights of real estate buyers to receive the same kind of protection from agents available to sellers in spite of any "professional creed" that dictates services to only one-half of the market.

2. "To say that the real estate agents 'manipulate the buyer' is not only misleading but accuses the industry of illegal activities."

Every time a broker or salesperson leads a buyer to believe that his best interests are being represented, when the broker or salesperson already has a legal obligation to the seller, this is an illegal activity. It's called "undisclosed dual agency," which is grounds in every state for court rescission of the sale, even if not other injury is shown by either buyer or seller.

In spite of warnings by the National Association of Realtors against potential damages to all involved when brokers act as double agents, real estate buyers and sellers continue to be placed at risk. Every time it is stated or implied that there is no difference between the kind of representation agents owe to clients and the honesty and fairness which all salespersons owe to customers, that's more than manipulation, it's deception, which can lead to charges of fraud or illicit dual agency.

Salespeople who think they can play the middle role of "working for all parties," without the fully informed consent of both buyer and seller in writing to an arrangement where neither gets "representation of their best interests," also take on the risk of one day selling used cars in the Everglades.

3. "The economy dictates pricing, supply and demand, not real estate professionals."

If the real estate market were truly free and competitive and could respond, without Realtor control, to the laws of supply and demand, we would find the following:

a) More brokers across the country would be representing buyers in response to clear indications from consumers that they want this service. Instead, Realtor associations have managed to suppress and restrain buyer agency. Smaller firms who considered buyer agency services a way to better compete with their bigger peers have been intimidated from doing so out of fear of boycott or withdrawal of cooperation. Some firms who adopted the practice of representing buyers have been driven from the market.

b) Brokerage fees would not have remained consistently at the 6-7 percent level in every market area whether the local housing market is going up or down. This is a mystifying phenomenon that is becoming more and more difficult to explain in pure economic terms. Brokers' fees are included in the price of homes and become part of the costs paid by buyers and sellers. Do consumers understand those fees are negotiable by law? When it took just a short time to sell a home in an "up" market, how many sellers were able to negotiate their fees downward?

BERNADETTE McTIGHE President, Single Agency Realty Association Inc. Rockville

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