More than two-dozen communities in Massachusetts saw their median home prices decline in 2005, including nine (above) that experienced drops of 5 percent or more.

Home prices slipped in more than two-dozen Bay State communities, including nine cities and towns that saw median selling prices fall 5 percent or more last year.

North Shore communities like Merrimac, Essex and Rockport, along with two towns on Cape Cod, were among those that experienced more than a 5 percent drop in median price for single-family homes sold from January through November of last year.

While home prices declined in 29 Bay State communities, most parts of the state saw values rise during the first 11 months of last year, and roughly 90 cities and towns across the state saw double-digit price appreciation last year, according to The Warren Group, parent company of Banker & Tradesman. The Warren Group collects sales statistics from the registries of deeds throughout the state.

Still, the fact that home prices are decreasing in some communities – after years when substantial price gains were the norm – is capturing the attention of industry watchers who are anticipating a softening in the residential real estate market this year.

Local Realtors already have witnessed a shift in the market in recent months as the number of unsold homes in many communities has jumped significantly and for-sale properties are taking longer to sell.

“The inventory is going up right now in this area, there’s no question about it,” said James Lovett, one of the broker-owners of Century 21 Toomey-Lovett, which has offices in Spencer and West Brookfield.

Lovett lives in North Brookfield, a small town in central Massachusetts where the median selling price for the 60 single-family homes sold during the first 11 months of last year fell 6.5 percent to $205,700 compared to the same months in 2004.

The residential real estate market in North Brookfield and surrounding towns is stable and homes in the region are more affordable than properties in eastern Massachusetts, according to Lovett.

But Lovett said many homebuyers overlook North Brookfield, which is located north of Route 9, for towns that are more accessible. Prices in bordering towns like Spencer or East Brookfield, which are located along Route 9, have gone up. The median price for single-family homes sold in Spencer from January through November of last year climbed 8.5 percent to $238,700.

Currently, there are 27 single-family homes in North Brookfield listed for sale ranging in price from $170,000 up to $650,000 for a 20-acre farm. The average list price of the for-sale homes is $307,578, and only three homes are available for less than $219,000.

‘A Good Market’
Fifty-five miles to the south of Boston, a quaint seaside town where home prices ballooned in 2004 saw values drop even more than North Brookfield.

Marion’s median price for single-family homes sold from January through November plummeted 25 percent to $415,663. The drop came after the median single-family home price in the town shot up 80 percent to $535,000 in 2004 from $297,500 in 2003. Local Realtors attributed the steep increase in 2004 to the large number of $1 million-plus homes that were sold, including a $4 million property overlooking Sippican Harbor.

“[Prices] spiked so fast, it’s only normal that things should level off,” said Maryann Hayes, who manages the Marion office of Coldwell Banker Residential Brokerage.

Hayes said there are many more properties available for sale, giving homebuyers a wider selection to choose from. By the end of 2005, home sellers, recognizing the shift in the residential real estate market, were more flexible in what types of offers they would accept, she said.

Hayes said she worked with a homebuyer who presented an offer for a $1.5 million home in Marion in August that was rejected by the seller. Weeks later, the homebuyer came back with a higher offer, and then gave a final offer of $1.2 million in October which the seller, after having his home on the market for about four months, decided to accept.

While there were fewer home sales over $2 million or $3 million last year in Marion compared to 2004, according to Hayes, two properties fetched more than $4 million, including a contemporary-style home on Point Road with ocean views and access to a private beach that sold for $4.35 million in September.

“It’s still a good market. There are plenty of buyers out there Â… but buyers are really looking for value right now,” she said.

Farther south on the Cape, home prices in Wellfleet and Truro – where the median selling price is over half a million dollars – also eased.

In Wellfleet, where 72 single-family homes were sold from January through November of last year, the median selling price fell 6 percent to $560,000 from $595,000 the prior year.

Truro experienced an even steeper decline. The median selling price decreased 9 percent to $636,000 from $700,000 in 2004.

Prices in those communities, where second-home sales are common, “definitely needed to level off,” said Suzanne Sherlock, an agent with Kinlin Grover GMAC Real Estate.

“I think at some point there needs to be a little bit of an adjustment,” Sherlock said. “I think some houses were priced higher than they needed to be.”

Sherlock doesn’t foresee a collapse in the housing market, however. “Things still sell in a day here if [they’re] priced right,” she said.

The lower prices didn’t surprise Chandler Crowell of Cape Cod Realty in Wellfleet.

“It’s consistent with what I’m seeing out there. Some prices have come down,” said Crowell, who noted that the number of for-sale homes grew in the fall.

Crowell said the strong residential real estate market of the past few years inspired many homeowners to sell their properties.

As of last week, there were about 90 homes on the market in Wellfleet – ranging in price from $350,000 to $3.5 million – compared to an average of about 50 homes in prior years, according to Crowell. In Truro, there were about 80 homes on sale, ranging in price from $400,000 to $6 million.

‘Making a Correction’
In addition to Wellfleet, Truro and Marion, some other seaside communities have also seen home prices trend down.

In Rockport, a tourist destination located on the tip of Cape Ann, the median selling price for single-family homes sold in the first 11 months of 2005 fell 5.6 percent to $420,000.

But real estate brokers cautioned against reading too much into such declines.

Broker Harold Beaton explained that the market was booming in the last two years, with half a dozen million-dollar properties available for sale in 2004 in Rockport, so even though prices have come down a bit they’re “still above average.”

Beaton, who owns Beaton Real Estate in Rockport, pointed out that there were two or three $2 million-plus home sales in town in 2004. “They were all-time record highs,” he said. But last year, no homes sold for over $2 million in Rockport, according to Beaton. A contemporary-style home on a 21-acre setting sold for $1.8 million in late November, and at least three other properties sold in the million-dollar-plus range.

Like other Bay State Realtors, Beaton said there has been an increase in the number of unsold homes. There were about three dozen single-family homes available for sale in Rockport last week, according to Beaton, where normally there would be about 24 homes.

“The market is adjusting down. It’s making a correction,” he said.

About 10 miles away, in Essex, the median single-family home price dropped 11.2 percent from $490,000 to $435,000.

Patricia Gallagher, manager of Vernon A. Martin Realtors in Gloucester, was surprised that price was lower.

“It really shocks me because sales prices have been a lot higher,” said Gallagher, noting that several newly constructed homes sold in the $700,000 to $800,000-range in 2005.

High-end sales included a five-bedroom home with more than 4,600 square feet of living space near the village shops and marina that sold for $925,000 in August, and a 3,100-square-foot Colonial that went for $869,000 in July.

Citing information from the MLS Property Information Network, the listing service that most agents and brokers in Massachusetts use, Gallagher said the average list price of for-sale homes in Essex was $861,457 in the past 12 months and the average sale price was $753,917.

In comparison, the average list price in 2004 was $638,094, and the average sale price was $612,803.

While Gallagher acknowledged that prices did start to “level off” last year, she said it is “very unusual” to find single-family homes in the $200,000 range in Essex.

Of the 20 single-family homes listed for sale in Essex last week, there were only two in the $200,000 range and one of them is a mobile home on sale for $250,000, said Gallagher. The other homes are priced from $515,000 up to $2.8 million for a 14-room mansion. Gallagher’s office is marketing a $2.39 million mansion that was used as a bed and breakfast.

“I’ve been in the business for 10 years and we’ve had three years of almost double-digit inflation. That’s not normal,” she said. “The market [is] compensating for those years. It’s leveling off.”

Brigid Venti, broker-owner of Cape Ann Country Properties in Essex, said many sellers are reducing their asking prices to draw offers.

“I think people are frustrated and they drop their prices way too fast,” said Venti. “I think it’s impatience on the part of the seller.”

But Venti said she still sees strength in the market. She noted that during Christmas week, a season that is traditionally slow for real estate agents, she had two offers for a multimillion-dollar single-family home she is marketing, and was busy answering phone calls from prospective clients.

“My phone was ringing this winter and it continues to ring,” she said, adding that she believes the residential real estate market will remain strong as long as interest rates are at 7 percent or lower.

“The bottom is not falling out in the housing market by any means,” Venti said.

About 30 miles north in the Merrimack Valley, the town of Merrimac saw several high-end sales during the last few months of 2005, according to real estate broker Sandy Berkenbush.

But the median selling price for the 65 single-family homes sold from January through November was down 11 percent, from $412,450 a year earlier to $367,500, according to The Warren Group.

Berkenbush, one of the broker-owners of Stone Ridge Properties – which has offices in Newburyport and Amesbury – said one of the reasons that prices may be lower is because quite a few smaller ranch-style homes and cottages were sold in 2005. In 2004, there were quite a few transactions involving newly constructed homes with higher price tags, she said. In addition to Essex, Marion, Merrimac, North Brookfield, Rockport, Truro and Wellfleet, the towns of Cheshire and Egremont also saw their median selling prices fall by more than 5 percent, with respective drops of 7.14 percent and 13.5 percent.