In line with predictions that years of record-breaking home sales and price increases were bound to come to an end, single-family home sales in Massachusetts fell 7.6 percent last year and median home prices climbed 5.5 percent – a stark contrast to the steady double-digit price appreciation recorded in recent years.
A total of 63,350 single-family homes were sold in the Bay State last year, down from 68,567 in 2004, according to The Warren Group, parent company of Banker & Tradesman. The median selling price for a single-family home statewide rose to $345,000 in 2005 from $327,000 a year earlier.
The 5.5 percent median price gain between 2005 and 2004, while hardly a sign of a slumping market, nevertheless is a sharp departure from the past four years when home sales prices escalated more than 10 percent annually. The median sales price for single-family homes in the state surged 63.5 percent during that time frame, from $200,000 in 2000 to $327,000 in 2004.
Real estate brokers say the slowdown in a housing market that often has been described as overheated was necessary.
“You can’t continue at that pace,” said RE/MAX New England’s Executive Vice President and Regional Director Chuck Lemire, explaining that household incomes and earnings weren’t keeping pace with housing costs. “The prices need to be corrected in many cases.”
Single-family home sales volume fell in most Bay State regions, with some of the sharpest declines occurring south of Boston in Barnstable and Plymouth counties.
Local Realtors say sales activity during the first few months of 2005 was similar, if not better, than the previous year. But real estate firms started seeing the market weaken in the fall.
Statewide, fourth-quarter home sales were off 14.3 percent. A total of 14,246 single-family homes were sold during the last three months of the 2005, down from 16,630 during the same period in 2004. The median selling price rose a slight 1.5 percent in the fourth quarter of 2005 compared with the final quarter of 2004, increasing from $329,900 to $335,000.
Bruce Taylor, president of Whitinsville-based ERA Key Realty Services, said there weren’t any drastic changes in the economy to affect consumers last year. But Taylor believes the devastating Gulf Coast hurricanes and the higher gasoline prices that followed in the latter part of 2005 were enough to shake consumer confidence.
“Was there a slowdown in household formation or job growth? I doubt it,” said Taylor, whose firm has offices in Worcester County. “But there were external factors like oil prices and hurricanes that really scared some people.”
Some 8,886 single-family homes were sold in Worcester County last year, down 7.3 percent from 9,582 in the prior year. The median selling price for single-family homes in the county jumped 6.2 percent to $269,900 in 2005. While the price gain was strong, it pales in comparison to the 10.5 percent increase experienced in 2004, when the median sales price reached $254,000, up from $229,900 in 2003.
Taylor says last year’s price increase sets a “much more sustainable” pace than the double-digit price appreciation of previous years.
On Cape Cod, single-family home sales were on a steeper decline last year. Transactions on Cape Cod plummeted 12 percent, with 4,853 units selling in 2005 compared to 5,511 a year earlier.
“The market has been adjusting for several months,” said Bob Churchill, a buyer’s agent who is president-elect of the Cape Cod & Islands Association of Realtors.
Churchill said severe winter weather at the start of 2005 put a damper on the Cape’s spring selling market, which begins as early as February. That affected sales numbers later in the year.
Buyers searching for property on the Cape also had more homes from which to choose. There were 12,613 homes listed for sale last year, up 21 percent compared with listings in 2004, according to Churchill, who cited information from the Cape Realtor association’s multiple listing service.
Homes on Cape Cod also took longer to sell. Cape homes sold after an average of 103 days on the market last year, up from 90 days in 2004.
“I noticed that there were fewer people [looking for homes], and the buyers that were in the marketplace were being more discerning and more cautious,” said Churchill, who is broker-owner of Buyers Brokers of Cape Cod, Churchill Assoc. in Yarmouth.
Still, slower sales and more inventory didn’t equate to strong downward pressure on prices. The median selling price for a single-family home in Barnstable County shot up 7.3 percent to $379,900 from $353,900 in 2004.
Advantage: Buyer
Year-over-year price appreciation was more modest in Plymouth County, where the median sales price for a single-family home climbed 4.6 percent to $340,000.
Transaction volume, however, dropped 12 percent from 6,907 homes sold in 2004 to 6,085 last year.
Plymouth broker Rita Gallant said buyer demand and sales activity eased in the fourth quarter of the year. In the fourth quarter of 2005, 1,368 single-family homes were sold in Plymouth County compared with 1,595 sales during the fourth quarter of 2004, a decline of 14 percent, according to statistics compiled by The Warren Group.
“Most of 2005 was a pretty strong year for us,” said Gallant, president of The Realty Guild, an organization that represents independent real estate firms in Massachusetts. “But the last quarter really [resulted in] a lot of changes.”
Gallant sees the drop-off as a natural part of the real estate cycle.
“We couldn’t continue at the rate we were,” said Gallant, one of the broker-owners of Plymouth Village Realtors. “I see this as a leveling off – and a necessary leveling off.”
Gallant says there are many more homes available for sale today than has been the case in recent years. During the month of January, there were about 4,700 properties for sale Plymouth County, up from roughly 2,700 in January 2005, she said.
“We’re seeing new properties come on the market daily,” Gallant said.
Even as price increases were moderating in most parts of the Bay State, prices were going up by 10 percent or more in the western region. The median selling price for a single-family home in Hampden County was $170,000 last year, an 11.8 percent increase from 2004, and Hampshire County’s median price was up 11.4 percent to $245,000.
In Franklin County, the median selling price edged up 10 percent to $183,000 from $166,400 a year earlier, but home sales volume was down 11 percent.
Linda Rotti, president of the Realtor Association of Pioneer Valley, said prices have risen as buyers who can’t afford property in the eastern part of the state move west.
Even within that region, buyers who can’t afford a home in pricier markets like Northampton and Amherst often expand their search to more affordable locations such as Greenfield and Springfield, she said.
However, Rotti, a sales manager at Jones Town & Country in Amherst, said following a strong 2005 the housing market now is starting to flatten out in all three western Massachusetts counties.
“In September we started to notice a slowdown,” she said. “There was a shortage of buyers starting around September, which allowed us to build up our inventory.”
Currently, there is a nearly eight-month supply of for-sale homes statewide, which gives buyers an advantage they haven’t enjoyed in some time, according to Rotti.
“People will have more time to decide what house they want to buy,” she said.
