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Realtor Says End Of Cold War Hurts

You've heard a variety of explanations for the slowing of single-family home sales, but Bill Bruch is getting out of the real estate business for a reason you probably have not considered:

The end of the Cold War.

``If the Berlin Wall hadn't come down, I'm sure I'd still be in business,'' said Bruch who, along with Tony Vedrich, owned eight Eastside Better Homes and Garden real estate offices for the past six years.

It's Bruch's contention that the sudden easing of the Communist threat in Europe has reduced military spending, and thus significantly reduced the number of people who can afford homes. He says the chain effect has finally hit this area and will be around for a long time. Long enough, he said, that it's time to get out of the real estate business.

As for the latest crisis in the Persian Gulf, Bruch said it will be ``more hurtful than helpful'' because of the confusion and uncertainty it has created.

``In real estate, when prices go up, the supply of homes increases,'' Bruch said. ``People come out of the woodwork to put their home on the market to cash in on the apparent higher values. It worked for a while, but suddenly the cash buyers dried up and all those sellers remained.''

Bruch points to a New York Times article on the effect of military cutbacks on Southern California, where the market has slowed. The newspaper reported that 10 military bases and installments have been marked by the Defense Department as candidates for closure or staff reductions. Lockheed announced it would lay off 6,000 workers and move its Aeronautical Systems Co. to Georgia, and Northrop said it would cut 2,700 jobs because of federal reductions. The Navy announced in June it would eliminate one-fourth of its fleet in San Diego. The list of military reductions went on and on.

``Last year we experienced a flood of cash buyers from California coming into our market,'' Bruch said. ``This initially drove up the prices and lowered the availability of properties for sale. When the cutbacks hit California, the market slowed. It was just a matter of time before it happened here.''

Bruch added that waterfront and large parcels of property probably won't be affected by his explanation for the slow down.

``People who need a home don't buy waterfront,'' Bruch said. ``It's just like people who need a car don't buy Rolls Royces. It's a different level altogether.''

According to most real estate brokerages that offer relocation services, the California market accounted for about 20-25 percent of sales in the Puget Sound area the past 12 months. Granted, some locals bought because they felt Californians were going to buy everything that was left. But remember, newcomers with fistfuls of equity did come from other states, too.

Bruch is probably getting out of the market because he doesn't see the profits in the near future meeting those of the past year. He admits that his partner, Tony Vedrich, ``thinks I'm nuts because the market is only undergoing a technical adjustment,'' but buyers definitely are more cautious than they were six months ago. Perhaps military cutbacks are a contributing factor.

``We still have people who want to buy houses,'' Bruch said. ``But we also have people coming here from places like Washington, D.C., who can't sell their house back there. When it becomes a combination of employers and geographic areas, you are bound to have a slowdown.''

If the end of the Cold War means a halting of runaway appreciation, prompting local brokers to circle their wagons, that's fine with me.

John Taylor, an economist for the U.S. Department of Housing and Urban Development, said Bruch's contention has some validity but that military spending has been only partly responsible for growth in this region.

``I'd hate to think that real estate values are tied to international tensions,'' Taylor said. ``But our rate of employment growth will be about half of what it's been in the past two years. There's a general weakness of the U.S. economy but it's not as bad here as in other areas of the country.

``The local housing market was ripe for a correction anyway,'' Taylor said. ``Prices had hit unsustainable levels. Discretionary buyers left the market because they were getting one-third more house for three times the mortgage payment.''

What will be interesting to see is what happens in the next six months. I think the geographic area deemed desireable for housing will grow. Workers will start their commutes to the city earlier in the day and many small companies with 15-20 employees will start, or relocate, to areas where raw ground is still reasonable - Puyallup, Mount Vernon, Cle Elum, Poulsbo. (Ten years ago, those places were called Woodinville and Federal Way.) Activity will rebound but it will be spread over a wider area.

Tom Kelly's column runs every Sunday in the Home/Real Estate section of The Times. Send your questions and comments to Tom Kelly's Column, P.O. Box 70, Seattle, WA, 98111.