DAN SULLIVAN
‘Very high’ demand
Sales of single-family homes and condos across the Bay State fell during the first quarter, while home prices leveled out – a signal that the robust appreciation of previous years won’t be evident this year, according to industry experts.
Single-family home prices rose substantially in every first quarter for the five-year period from 2000 to 2005 before flattening in the first quarter of 2006. Prices actually slid in six Massachusetts counties, with the biggest drops taking place in Essex and Middlesex counties.
Industry observers say first-quarter results are in line with most predictions that sales and home price appreciation will moderate this year. Ingo Winzer, who heads a Wellesley-based real estate analysis firm, said given the Boston region’s low population growth and sluggish job market over the last several years, the fact that home prices are starting to even out should come as no surprise.
“Prices here have increased rapidly in the last five years or so and now they’re above the point that people can afford,” said Winzer, president of Local Market Monitor, a firm that rates the Boston metropolitan area as one of the most overvalued housing markets in the country. “It’s not surprising that we would have a correction sooner than some of the other markets.”
Still, Winzer doesn’t predict that home prices will plummet. “It’s unlikely that there’s going to be a drop in the prices unless something bad happens to the local economy,” he said.
Some 10,534 single-family homes were sold statewide during the first quarter, an 8.4 percent drop from the 11,497 units sold during the same three months last year.
The median price for single-family homes sold from January through March was $325,000, which is the same price for homes sold during the same months in 2005, according to The Warren Group, parent company of Banker & Tradesman.
Condo prices, however, continued their upward climb. The median price for a condo jumped 5.8 percent to $275,000 in the first quarter. Some 6,108 condos were sold in Massachusetts, down slightly from 6,163 sales a year earlier.
A Larger Supply
Real estate brokers say there was a much larger supply of unsold homes during the first quarter, giving buyers plenty of options and providing more competition for sellers.
“We’ve been following a trend from last September, October and November where inventory started to creep up and sales started to slow down,” said David Wluka, a Sharon real estate broker who is president of the Massachusetts Association of Realtors.
Wluka said many prospective homebuyers were “confused” about news reports on a housing bubble and possible market crash and held off on purchasing a home.
Talk of a local housing bubble has intensified over the last two to three years as home prices continued to soar even though the state struggled with population loss and relatively weak job gains.
Winzer, of Local Market Monitor, said home prices are “well above” corresponding income levels in eastern Massachusetts.
According to his firm’s analysis, prices in the Greater Boston market are 32 percent higher than local income levels would support.
Meanwhile, the number of homes on the market has exploded. There were 60,373 single-family homes and condos listed for sale as of March, nearly 40 percent more than last March, according to MAR. March’s inventory was at its highest level in over a decade, MAR reported last week.
“The normalization or correction Â… is taking place,” acknowledged Wluka.
Single-family homes sales dropped sharply in Essex and Middlesex counties. Home sales plummeted 19 percent in Essex County and almost 11 percent in Middlesex County during the first quarter.
The median price for a single-family home in Essex County decreased 4 percent to $344,900 in the first quarter compared to a year ago, while the median price for homes in Middlesex County slipped 2.6 percent to $398,500.
Despite the drop in sales and prices, real estate agents in those regions say activity has begun to perk up this spring.
Lois Williams, who manages the Topsfield and Georgetown offices of Coldwell Banker Residential Brokerage, said she recently saw multiple offers on a single-family home in Boxford priced in the high $500,000s.
“If the houses are priced well, buyers realize that and they’re ready to buy,” Williams said.
But Williams, a past president of the North Shore Association of Realtors, said with more homes on the market, buyers are feeling less pressure. “They have the ability to shop, which is a healthy thing, quite frankly.”
Sellers and agents, on the other hand, have to pay more attention to properties they’re competing against, Williams explained.
“My mantra these days is ‘it’s all about price,'” she said.
Chelmsford Realtor Dan Sullivan also stressed the importance of pricing, saying home sellers must be realistic about the market.
Like Williams, Sullivan said he has seen multiple offers for at least three properties in the last week, including a home in Lowell.
With mortgage interest rates inching up, both Sullivan and Williams said they believe it could be the extra impetus for some people to finalize decisions about purchasing a home.
The increase in rates could make it difficult for some buyers, acknowledged Sullivan, and may push some to purchase less costly condos instead of single-family homes.
“Demand is still very high,” said Sullivan, an agent with Coldwell Banker Residential Brokerage and president-elect of the Northeast Association of Realtors.
While single-family home sales were down in most parts of the state, sales were brisk in Suffolk County, shooting up 9.6 percent during the first quarter.
In Suffolk County, which includes Boston, the median single-family home price fell to $350,000 from $356,000 during the first quarter of 2005.
Unlike Suffolk County and at least five other counties that saw home prices dip, home prices climbed in western Massachusetts and on Nantucket.
Nantucket’s median price rose 11.8 percent to more than $1.5 million in the first quarter. Hampshire and Franklin counties’ median single-family home prices were up 18 percent and 13 percent respectively, while the median selling price for single-family homes sold in Berkshire County increased 6.5 percent to $185,000 in the first quarter.
Hampden County’s median single-family home price inched up 3 percent to $165,000.
Condo sales and prices soared in Worcester County, which posted 630 sales in the first quarter – up 34 percent from a year ago. The median price for condos sold during the first three months of the year in Worcester County surged 16 percent to $215,000.
The current climate suggests that homebuyers have the upper hand this year – a contrast to the years where demand outpaced the supply of for-sale home and sellers were fielding competing purchase offers.
Winzer’s advice to consumers: “Sellers need to be realistic, and buyers can pretty much drive a hard bargain.”
