JUDY MOORE
‘Steady gains’

The Massachusetts residential real estate market enjoyed its best year ever in 2003 as homebuying activity rose to record levels in much of the state – driven by historically low mortgage rates, modest job growth and strong demand from immigrants, baby boomers and first-time buyers – according to a report issued last Thursday by the Massachusetts Association of Realtors.

Home prices also rose in 2003 for a 10th consecutive year, indicative of a market in which more housing production is needed, but the rate of price appreciation did moderate this past year as inventory levels have slowly improved.

In 2003, MAR data show sales of detached single-family homes rose 4.9 percent in Massachusetts, from 46,770 in 2002 to 49,040 this past year. Also, condominium sales increased 16.2 percent, from 14,912 a year ago to 17,324 in 2003, setting a new annual record for the Bay State. The total of 66,364 detached single-family homes and condos sold in 2003 sets a new record for most residential sales in one year in state history, eclipsing the previous high of 62,662 homes sold in 1999.

“This past year was a terrific one for anyone in the market to buy a home, and 2004 looks to be equally promising,” said MAR President Judy Moore, of RE/MAX Premier Properties in Lexington. “Today’s interest rates are among the lowest in a generation, and that’s helped to increase purchasing power and open the door to homeownership for thousands of first-time buyers. We’ve also seen steady gains in supply levels, and that not only means more homes for buyers to choose from, but better balance in the market ,which has helped to bring an end to the rapid, double-digit price appreciation of recent years.”

‘An Attractive Option’

Regionally, in 2003, sales of detached single-family homes improved in all seven market areas of the state compared to one year earlier, with sales gains greater than the statewide growth rate observed in the Central/Worcester County (7.6 percent), Northeast (7.1 percent), Southeast/Greater Fall River-New Bedford (6.1 percent) and South Shore (8.5 percent) regions. Similarly, the condominium market also saw sales gains in all regions this past year, with the largest increases in year-to-year sales activity reported in Greater Boston (18.7 percent), the Southeast/South Coast region (18.1 percent) and Western Massachusetts (22.9 percent).

“The demand for condos is unprecedented, with one of every four single-family home sales now occurring in this market,” Moore said. “Condos offer an attractive option to the higher-priced detached home market for entry-level buyers and are also quite popular among empty nesters and baby boomers looking to downsize or buy a vacation or second home.”

While the past year started slow due to severe winter weather and apprehension over job security and the war in Iraq, activity picked up in the second half of 2003 as the economy strengthened and mortgage rates declined to levels not seen in over 30 years. Sales of detached single-family homes fell in each of the first two quarters from year ago levels by 10.6 percent and 4.9 percent respectively, but rose 16.1 percent in the third quarter and 15.8 percent in the final quarter of 2003 to establish a new fourth-quarter sales record with 12,788 homes sold.

Additionally, after seeing flat sales in the first three months of 2003, the condo market improved steadily in each of the final three quarters over comparable periods in 2002, increasing 6.5 percent in the second quarter, 30.8 percent in the third quarter and 24.9 percent in the fourth quarter. All three quarters also saw new record-high sales totals established for the respective three-month periods, with the 5,486 condos sold in the third quarter of 2003 setting a new mark for most condominium sales in any one quarter in state history.

Among those keeping demand strong, Moore cited long-time renters who are now able to own a home for the same amount or less per month than it costs to rent; baby boomers who have hit their peak earning years and are purchasing second homes and investment properties; and immigrants (the largest segment of new U.S. homebuyers), many of whom have settled in the Bay State and are buying homes in urban centers.

Significantly, those entering the market in the last year have had a larger selection of homes from which to choose. In fact, the number of single-family properties (detached homes and condos) listed for sale reached a five-year high in 2003, climbing 16.8 percent from a monthly average of 32,104 listings in 2002 to 37,506 this past year. That represents 6.8 months’ worth of supply, up from 6.2 months in 2002, and the most since 6.7 months of supply was available in 1998.

With inventory levels up, supply and demand has become more balanced, and that has led to more modest home price appreciation in the past 12 months. In the detached single-family home market, the statewide average selling price rose 9 percent last year, from an average price of $345,141 in 2002 to $376,360 this past year. In addition, the statewide average selling price for condominiums increased 9.6 percent, from an average of $243,951 one year ago to $267,269 in 2003.

Within regional markets, modest to healthy price gains were observed in all areas of the state during 2003, both for detached homes and condos. In the detached single-family home market, prices rose over year ago levels by an average of 6 percent to 8 percent in the Greater Boston, Northeast, South Shore and West regions, 11 percent in Worcester County and 19 percent on Cape Cod and the Islands and in Southeastern Massachusetts. Meanwhile, prices for condos climbed 5 percent to 6 percent in Greater Boston and Western Massachusetts, 11.5 percent in Northeast region, 14 percent to 16 percent in the Central and South Shore regions, and by 20 percent or more on Cape Cod and the Islands and in Southeastern Massachusetts.

“The healthy price increases we’ve seen this past year are consistent with a market that has experienced record sales activity,” observed Moore. “The good news for buyers is that prices are no longer appreciating as rapidly as in they did in years past, while sellers should find comfort in knowing their home’s value is likely to continue to increase for the foreseeable future, since buyer demand continues to outpace supply in most markets.”

While it will be difficult to sustain the record sales pace of 2003 in the year ahead, MAR officials anticipate a brisk spring market with attractive mortgage rates, modest job growth, rising home values and increased housing supply expected to keep activity strong by historic standards. “Since 2001, housing has become the investment of choice for most Americans, and we don’t see that changing in 2004,” said Moore.

Sales and price data from the MAR report reflects transactions occurring through Realtor-affiliated multiple listing services in the commonwealth, and account for approximately 80 percent of all real estate sales in Massachusetts.