Home sales and prices in the Bay State picked up during the first five months of the year, but with the advent of the traditionally slower summer season, some buyers may be able to grab good deals because homeowners are eager to sell. This three-bedroom house at 169 High St. in Reading has been reduced from $399,900 to $379,000.
After years of escalating home prices, rapid property sales and multiple purchase offers, many market watchers predicted 2004 would be the year when home price appreciation finally eases and the residential real estate market begins favoring buyers.
In some ways, that appears to be happening: Realtors in several Bay State regions are saying that the number of for-sale homes has grown and properties are taking weeks longer to sell. And with the dog days of summer here – a time when sales activity typically slows – a good number of homeowners are eager to sell their properties and are lowering asking prices.
But a look at sales statistics for the first five months of the year suggests a different story. While local Realtors and national economists predicted home prices would increase anywhere from 3 percent to 5 percent this year, the Bay State has experienced double-digit price appreciation in the first part of the year.
The median price for single-family homes sold from the beginning of the year through May jumped 10.8 percent to $310,500 from $280,000 during the same months in 2003, according to The Warren Group, parent company of Banker & Tradesman.
Unit sales also increased significantly, with 23,024 single-family homes changing hands from January through May, up 19 percent from a year ago when 19,346 homes were sold during the same months.
The condominium market experienced similar trends. Condo sales increased 19 percent to 10,106 unit sales through May of this year, up from 8,473 a year ago. The median condo price reached $246,445, a 12 percent increase from a year ago when the median price was $220,000.
Realtors attribute the strong performance of the residential real estate market so far this year to job growth, an increase in consumer confidence and low mortgage interest rates. Consumer confidence jumped 9 points in June to a two-year high, and in Massachusetts, 9,700 jobs were added in May – the third consecutive month of employment gains in the state, according to the state Division of Unemployment Assistance.
Shari Marquis, a real estate broker in Plymouth, said as mortgage rates have inched up in recent months, homebuyers have felt more of an “urgency” to purchase to avoid further rate hikes. “People are afraid they’re going to be priced out of the market,” said Marquis, broker-owner of Marquis GMAC Real Estate, with offices in Plymouth, Boston, Wareham and Duxbury.
Finding a Balance
The average interest rate for a 30-year fixed-rate mortgage was 6.21 percent last week, according to the Mortgage Bankers Association. In mid-March, rates had fallen to as low as 5.53 percent. The National Association of Realtors is forecasting that interest rates will rise to 6.6 by year’s end. Mortgage rates had already risen in anticipation that the Federal Reserve would raise the federal funds rate.
Last week, economists anxiously waited to see how high the Federal Reserve would raise the benchmark interest rate, which affects short-term borrowing but does not have a direct effect on mortgage rates. The Federal Reserve ultimately increased the federal funds rate by one-quarter percentage point to 1.25 percent last Wednesday, the Fed’s first rate hike in four years.
Many in the housing industry aren’t too concerned about the impact rising interest rates will have on the residential real estate market. They maintain that any increase in rates will be offset by an improving economy that will help keep the buyer demand healthy. Further, they say that demographic trends that point to rising numbers of immigrants, aging baby boomers looking to downsize and the children of boomers getting ready to own their own homes, will help prop up the housing market.
“With mortgage interest rates bottoming out in March, we’ve had a big rush of homebuyers this year,” NAR Chief Economist David Lereah said in May. “Home sales should hold close to record territory for a couple months, then ease in the second half of the year but remain at historically strong levels.”
However, some predict that the rising interest rates will ultimately help flatten prices, particularly in high-cost areas, as purchasers’ buying power decreases.
In Massachusetts, Bay State Realtors maintain that this isn’t the hot sellers’ market that many have grown accustomed to despite the higher home prices and strong sales so far this year. “The market is definitely more balanced,” said Marquis.
In a more market better balanced between buyers and sellers, prices would not increase by 10 percent or more, but Marquis pointed out that the housing market sometimes defies normal trends. When all other industries suffered during the last economic recession, for example, residential real estate was booming.
“The housing market doesn’t always do what we expect. We’ve seen that in the last two years,” she said.
Still, Marquis and other Realtors say homes are taking longer to sell and buyers are looking at more homes before making a decision to purchase. As of last week, there were 379 single-family homes available for sale in Plymouth, a number larger than usual, according to Marquis.
Home prices are holding strong, but lately Marquis has noticed that some home sellers in Plymouth are agreeing to take the closing costs out of the proceeds of the home sale instead of having the buyer come up with a several thousands dollars at the closing.
Reading real estate broker Mary Ann Quinn agrees with Marquis that the housing market has shifted, and buyers and sellers are on a more even playing field than they once were.
Quinn, who is president of the Eastern Middlesex Association of Realtors, said she noticed a bit of a “frenzy” during the spring months as buyers, fearing rising interest rates, came out in droves. But in the last four weeks, Quinn has seen many more price reductions in Reading.
“People are getting better deals and negotiating harder than they were,” said Quinn, manager of Century 21 North Shore in Reading.
Part of the reason that home sellers are lowering prices is because the spring market, when sales activity is typically at its peak, is over. Another reason is that some home sellers have already committed to purchasing another home and need to sell their properties. About 80 percent of the listings that Quinn has, for example, fit that description.
Quinn also is noticing that homes are taking between two and three weeks longer to sell. The average marketing time for single-family homes in Reading stood at 42 days last week, and for condos it was 101 days. Quinn anticipates that during the last half of the year sales and price appreciation will slow and the statistics will reflect a more balanced market.
“The market is more realistic this year than it was last year,” said Joyce Gerraughty, manager of Jack Conway & Co.’s Mansfield office.
While Gerraughty’s office has more for-sale home listings and properties are sitting on the market a bit longer, she said company-wide sales figures are higher than last year. “We’re still getting plenty of activity,” she said.
Sales and prices were up in other parts of the country known for their tight housing markets. In California, for example, the median existing-home price increased 26.5 percent in May reaching a new high of $465,160, and sales increased 10.5 percent compared to the same period a year ago, according to the California Association of Realtors.
Aglaia Pikounis may be reached at apikounis@thewarrengroup.com.
