The 1999 single-family housing market in Massachusetts flattened slightly after three red-hot years, while condominium sales in the Bay State experienced a surge.

Despite the cooler numbers in home sales, real estate agents from the Berkshires to Cape Cod agree the number-one factor limiting sales in Massachusetts is a lack of available inventory. With that inventory, they conclude, 1999 would have been another smashing success in the world of residential real estate.

There were 101,774 sales of non-condominium residential housing units in Massachusetts in 1999, according to information provided by Warren Information Services, a sister company of Banker & Tradesman. That figure is just 0.8 percent higher than 1998’s final tally of 101,009 sales.

Sales of condominium units, however, jumped 6.8 percent in 1999. Condominium sales totaled 23,999 last year, compared to 22,472 in 1998.

Total sales of both condominium and non-condominium units in 1999 were 125,773, a 1.9 percent increase over 1998’s total of 123,463.

Median prices for both houses and condominiums rose in 1999. Home prices were 9 percent higher than 1998 levels, and condo prices increased by 14 percent.

The statistics include all residential transactions, including non-MLS sales and properties for sale by owner.

I think you have to remember that 1998 was a big year for real estate, and any increase should be considered significant because it was such a high-volume year, said Karl Case, professor of economics at Wellesley College.

Though Case termed the increase significant, agents argue it could have been more significant had more homes been available.

The single-family market reflects the depleted inventory, said Elizabeth G. Randall of Elizabeth Randall Realty in Adams and president of the Berkshire County Board of Realtors.

It’s inventory-related, Thomas Lee of ERA Andrew Real Estate in Medford said concerning 1999’s market performance. The number of sales would be larger if the inventory existed.

We have ongoing bidding wars all over this area, added Lee, president of the Eastern Middlesex Association of Realtors. If I had five properties come on the market right now, they’d all sell. That’s a big signal that it’s an inventory issue … I don’t think anyone has seen a decline in buyer interest.

The lack of inventory can be attributed to the steady rise in mortgage rates, Case said.

People tend to think of rates as driving the demand, but they also have an inventory effect, Case said. If I’m sitting on a 6 1/2 percent 30-year fixed rate mortgage, I might not be as inclined to roll over into an 8 percent [mortgage] by trading in for a new home. That tends to shift the supply side back, which pushes up the market.

Total residential sales were off most significantly in Dukes County – which is Martha’s Vineyard – and Nantucket, where the number sales dropped 5.6 percent and 21.4 percent, respectively. Richard F. Martin of Dick Martin & Assoc. in South Yarmouth and president of the Cape Cod & Islands Association of Realtors attributed those declines solely to a lack of homes available for sale on the islands.

In Suffolk County, 11,004 residential sales were recorded in 1999, an 11 percent increase from 9,913 in 1998.

Middlesex County, the largest in the state in terms of population, saw a 0.1 percent decrease in total sales, from 26,087 in 1998 to 26,063 in 1999.

Total sales figures were also off in Norfolk and Essex counties, with decreases of 4.1 percent and 5.4 percent, respectively.

All four counties in Western Massachusetts saw higher total residential sales volume in 1999 than in 1998. Berkshire County sales went from 2,421 in 1998 to 2,588 in 1999, a 6.9 percent increase.
Hampden County’s figures jumped 9 percent from 7,020 to 7,655. Hampshire County had 2,491 sales in 1999, up 3.5 percent from the 1998 total of 2,406. Franklin County increased 9.5 percent from 1,146 in 1998 to 1,255 in 1999.

We had the inventory available, and we sold a lot of houses, said Raymond P. Authier of Realty World Authier in Chicopee and president of the Greater Springfield Association of Realtors. There was a lot of new development and new construction, and there was so much out there for first-time homebuyers.

Barnstable County’s total residential sales were up 6.6 percent, from 10,297 in 1998 to 10,977 in 1999. Bristol County sales totaled 9,592 in 1999, up 1.6 percent from 1998.

Sales in Plymouth County rose 1.1 percent from 10,452 in 1998 to 10,564 in 1999. Worcester County saw a 5.6 percent increase, from 14,776 in 1998 to 15,603 in 1999.

Condo Boom
Condominium sales were strong throughout most of the state. Franklin County had a 28.3 percent increase in condo sales, while Hampshire’s condo figures jumped 25.2 percent. Barnstable County’s condo sales volume was up 19.1 percent, while Nantucket saw a 16.7 percent increase.

Worcester County saw condo sales increase 13.8 percent, and Suffolk County had 14.6 percent more condo sales in 1999 than in 1998. Four counties – Berkshire, Bristol, Essex and Norfolk – had slight decreases in condo sales. The rest of the state had increases.

The pickup in Massachusetts condominium sales was reflected on the national level. The National Association of Realtors reported that condominium and cooperative sales in the United States set a new record of 677,000 units in 1999, a 12.1 percent increase over the previous record of 604,000 in 1998.

Condo sales have picked up because of they’re a low-cost alternative, Case said.

There’s more demand for condos now, Martin said. People are looking to downsize, and this is one of the price ranges most people can get into. Lee added that condominium sales are most likely gaining faster than non-condominium sales because there is an available inventory.

Condominiums have a great mix of people, and the prices are fair, said Authier, who developed a 50-unit condominium complex near the Fairfield Mall in Chicopee. He is set to close the sale of the last seven available units in his complex this month.

We planned to sell it out in three years, and we did it in two, he continued. He said that segments of the populations such as those 55 years old and older might want to move into a smaller property with less responsibility than owning a single-family home.

The figures [HUD] recently released showed that more people are owning homes than ever before, he said. People don’t want to give up home ownership, so the condominium is the way to go.

Authier has plans for future condominium developments in the Chicopee area.

Rising Prices
Whether purchasing condominiums or other residential units, a strong economy fueled by sparse inventory is prompting homebuyers to shell out more money for their new homes.

The 1999 median sales price for non-condominium residential units in Massachusetts was $168,900, a 9 percent increase over the 1998 median of $155,000. The median condominium price statewide was $134,000, a 14 percent jump from the 1998 median of $117,500.

The overall median for all residential unit sales was $160,450 in 1999, 7.5 percent higher than the 1998 median of
$149,200. None of the Bay State’s 14 counties reported a decrease in the overall residential unit sales price median.

The highest percentage increase in the state came from Dukes County, which went from a $180,000 median in 1998 to $230,000 in 1999, a 27.8 percent jump. Suffolk County’s median jumped 19.5 percent from $159,000 in 1998 to $190,000 in 1999.

Double-digit percentage increases were reported in Barnstable (13.6 percent), Middlesex (14.9 percent), Norfolk (11.7 percent) and Plymouth (12.9 percent) counties.

The highest median sales price was in Nantucket County: $397,000 for 1999, a 2.5 percent increase over 1998’s median of $387,500.

Rural Franklin County reported the lowest median sales price in 1999: $95,000. That figure remained unchanged from 1998.

As a lack of inventory and rising interest rates affected the real estate market in 1999, Case predicts that interest rates and the stock market will most likely have the largest influence on the 2000 real estate market.

2000 really depends on those two things, he said. It depends on the progress of inflation. If that’s a struggle, it could affect interest rates.

But if it turns out to be a prolonged struggle, it might be good for the market because it will soften the landing of higher rates, he continued.

Also, the real estate market’s growth has been on the back of the overheated stock market, Case said. If the stock market takes a dive, Case said the impact will be felt in real estate, though he expects the impact – if any – to be less severe than what happens on Wall Street.

It certainly will take the heat out of the [real estate] market quickly, though, Case said.