CAROLYN CHODAT
Prices are softening
In line with predictions made early this year, the red-hot housing market in Massachusetts has begun to cool with sales and price appreciation moderating through the first three quarters of the year.
Condominium sales, however, have remained brisk throughout the year, fueled by demand from first-time homebuyers seeking a more affordable housing option and aging baby boomers who seek the maintenance-free living that condos offer.
Sales of condos surged 16 percent during the first three quarters of the year, compared to the same months in 2004, according to The Warren Group, which collects home sales statistics from the registries of deeds in Massachusetts and is also the parent company of Banker & Tradesman. Single-family home sales slipped 5.4 percent during the same period.
Prices for both continued to climb. The median selling price for single-family homes rose to $347,500, or 6.6 percent higher than the $325,900 median price of a year ago, while the median selling price for condos jumped 9 percent to $279,000.
Those statistics are not a huge surprise to industry watchers who had predicted at the beginning of the year that as interest rates edged upward home prices would increase at a more moderate pace, as opposed to the double-digit appreciation of prior years
But in Massachusetts, which has struggled with a housing shortage in recent years, the market has been affected by another factor: a dramatic rise in the number of homes listed for sale. With buyers having more homes to choose from than in the past, for-sale properties are taking longer to sell, and some owners are cutting their asking prices to attract offers.
In some areas of the state, the number of homes available for sale doubled. In Norwell, there were 85 homes available for sale as of last week, up from 40 properties a year ago, according to Jill Duffy, who manages the Norwell office of William Raveis Real Estate & Home Services. The average days on the market for those homes also jumped from approximately 110 days to 150 days.
“I think it’s obvious to everyone that inventory is up, the days on market is up,” said Duffy. “And pricing is now actually making an adjustment. I like to call this a transitional market. It truly is a correcting market trend that we’re in.”
Duffy, who describes the market shift as gradual, said she believes that homebuyers who are expecting and waiting for home prices to plunge will be disappointed.
“Informed buyers will realize that the adjustment period we’re experiencing is going to be gradual,” she said. “Traditionally [in real estate] we don’t see trends of a dramatic drop in the market, or what the average individual likes to call a housing bubble bursting.”
Tom Marquis, a real estate broker with over 30 years of experience, said the real estate market has become more balanced between buyers and sellers, which he terms “healthy.”
“There has not been balance in the market for a long time,” said Marquis, who owns Marquis Real Estate GMAC, which has offices in Brighton, Duxbury, Plymouth and Wareham. “We needed a correction. A lot of Realtors don’t like to admit it.”
Properties in good condition and attractive locations are still selling well, according to Marquis, while homes that need work in less desirable locations are having the most problems selling.
“Before, you could put a house on the market with a broken window in the garage and someone would still buy it,” said Marquis, who noted that homes must be presented to attract buyers. “The best properties still demand the best prices,” he said.
No Buyer ‘Urgency’
Some 49,110 single-family homes were sold from January through September, down from 51,937 a year ago, according to The Warren Group.
Single-family home sales were down throughout most parts of the Bay State, except the western region. There were slight increases in home sales in Hampden, Hampshire and Berkshire counties, as well as Nantucket.
Meanwhile, 26,870 condos were sold through September, up from 23,192 during the same time last year.
Realtors attribute the strength of the condo market to demand from first-time homebuyers who can’t afford pricier single-family homes and empty nesters who are selling single-family homes and no longer want to be bothered by yard maintenance and snow shoveling.
Marquis said the condo lifestyle is also appealing to children of baby boomers, the so-called echo boomers, many of whom are young working couples who don’t have the time to take care of yards and all the maintenance that comes with a single-family home.
Low mortgage interest rates have been a critical factor in the residential real estate market locally and nationally. Rates for a 30-year-fixed mortgage were under 6 percent in May, June and July, before hitting about 6 percent in August, according to HSH Assoc., a financial publisher.
Even with the slight bump-up, interest rates are still attractive, according to local Realtors.
Duffy, of William Raveis, said rate increases are forecasted to be so gradual in the future, that she does not think they are creating any “urgency” on the buyer’s part.
“We are seeing slight increases,” she said. “If you look at the overall interest rates that are available to the consumer right now they are extremely attractive in comparison to the 1970s and 1980s,” she said.
Besides interest rates, weather also seemed to play a part in how this year’s residential real estate market is shaping up.
Carolyn Chodat, broker-owner of Classic Properties in Medway and Milford, said the harsh winter affected home sales during the first half of the year, and delayed the start of the spring market, which is typically the busiest season for residential real estate.
For the first part of the year, there was a shortage of homes listed for sale, according to Chodat.
“Once the good weather hit, we started to see more and more listings. Our inventory started to double. Prices were still high, or increasing, but now with the doubling of the inventory we’re starting to see prices soften,” she said.
Chodat believes homeowners, who have seen prices escalate over the years, were spurred to sell their homes after reading and hearing stories about the housing bubble bursting.
“I think that they saw the opportunity for selling their house at a good profit margin was there, and there were rumors that the bubble was going burst. I really believe that rumor compelled sellers to put their home on the market because they didn’t want to miss the market,” she said.
Nelson Zide, senior vice president of Whitinsville-based ERA Key Realty Services, also thinks that many sellers, including longtime homeowners, wanted to take advantage of strong price appreciation.
Zide said there was a significant jump in for-sale home listings in August, with inventory increasing anywhere from 25 percent to 75 percent depending on the community.
This boost in listings has given homebuyers an edge. “The buyers realize that instead of going out and looking at three homes and having to make a decision quickly they can look at 15 homes,” Zide said. “There are still buyers out there looking. It’s not what I would call a bad market. It’s just a little bit slower.”
Overall sales at ERA Key Realty Services, which has offices in 11 communities including Framingham, Worcester and Milford, are up by about 5 percent from last year, according to Zide.
Other companies have seen their sales drop off. Marquis estimated that sales at his four offices are off by about 5 percent to 10 percent.
Some in the industry believe that disasters such as the recent hurricanes and the tsunami in Indonesia have hurt consumer confidence and affected sales.
“I think that when there are some natural disasters or major events happening in the world people generally stand still for a little bit. They wait and watch to see what’s happening,” said Chodat.
But with all the energy and resources that have been spent to rebuild those areas, Chodat feels there will be a turnaround in consumers’ thinking.
“I think we’re feeling safer again and feeling that we can go on with our lives,” she said.
