Bay State Realtors say it’s taking longer to sell homes, as buyers have more inventory from which to choose. This Framingham home, located on Bridle Path Circle, features an updated kitchen and is listed for sale for $499,900.

Just as the stock market started to nosedive and the dot-com industry collapsed a little more than a year ago, Bay State real estate agents began noticing a softening in the higher-end housing market.

Today, some local Realtors are bracing themselves for a tougher real estate market, as single-family homes with more modest price tags linger on the market longer, the number of for-sale home listings grows and price reductions become more common.

Amid all the talk of a housing bubble about to burst, Realtors interviewed by Banker & Tradesman last week acknowledged that there has been a noticeable shift in the market – from the frenzied activity and high price appreciation that has been common for three years to a more “normalized” market. Even though it took about the same amount of time to sell homes – 60 days – that were listed for sale during the first nine months of the year compared to the same months a year ago, single-family homes priced over $350,000 are taking longer to sell this year, according to statistics provided by Multiple Listing Service-Property Information Network.

“Anytime you’ve had a such a dramatic increase in prices – any economist will tell you it can’t last forever,” said Judy Moore, the incoming president-elect for the Massachusetts Association of Realtors.

“They [agents] really have to be more careful than they had been three or four months ago,” said Nelson Zide of ERA Key Realty Services in Framingham. “Three or four months ago, you could put almost any price within reason on anything and it probably would have sold. You look at it now, and that’s not true.”

According to Bay State Realtors, homes are taking longer to sell, and buyers can choose from a greater number of homes on the sales market. “Homes are on the market a lot longer and there is more inventory,” said Moore, an agent with Re/Max Premier Properties in Lexington.

Despite this, Realtors insist that homes priced in the lower- to mid- price range – those most attractive to first-time homebuyers — are still benefiting from strong buyer demand which is largely being fueled by low interest rates.

“We have fewer buyers, but there’s still more buyers than there are sellers,” said David S. Drinkwater, MAR president.

Drinkwater predicts that prices are not likely to “crash” but will stabilize to reflect a more “normal” market, where home prices don’t increase as much as they have in the past. “At certain price levels, there’s still not enough inventory. The build-up of inventory is at the higher-end of the market.”

On average, single-family homes sold through the beginning of October, stayed on the market only a day longer compared to homes sold during the same time period a year ago, according to MLS-PIN. Generally, single-family homes priced under $350,000 sold more quickly this year, but those priced higher stayed on the market an average of about 10 days longer during the first nine months of this year compared to a year ago.

The more expensive single-family homes – those priced over $700,000 – took much longer to sell. For example, homes priced $1 million or more took almost a month longer to sell – 93 days compared the 68 days it took to sell similar priced homes a year ago. Homes priced $800,000 to $900,000 stayed on the market 84 days, about two and one-half weeks longer than a year ago.

More moderately priced homes, like homes in the $500,000 to $600,000 price range, took more than a week longer to sell during the first nine months of the year compared to the same months in 2001.

Even though these statistics might suggest a softening real estate market, sales of single-family homes during the first half of the year were robust and there was a strong price appreciation, according to MAR statistics. Drinkwater attributes that to low interest rates, mild weather conditions and the pent-up demand left over from last year’s fall market, when sales activity came to a near standstill the weeks after the Sept. 11 terrorist attacks.

In fact, sales of single-family homes priced $250,000 and higher during the first half of the year surged nearly 24 percent. There were 15,434 sales of single-family homes priced $250,000 and higher, up from the 12,462 sales sold a year ago, according to The Warren Group, parent company of Banker & Tradesman. However, there were fewer sales of single-family homes priced under $250,000 during the first half of the year. Some 11,964 single-family homes were sold from January through July of this year, an 8 percent drop from the 13,061 single-family homes sold during the same months in 2001.

The median price for single-family homes sold through July of this year, the most recent month for which statewide statistics are available, was $250,000. That represents a 15 percent increase from the $217,000 median price during the January-July period a year ago. The median price for single-family homes sold in all of 2001 was $225,000, a 13 percent increase from the $198,900 median price posted in 2000, according to statistics compiled by The Warren Group.

‘Normal’ Times

Drinkwater and other longtime Realtors remain unconvinced that they’re facing a housing bubble. The housing bubble theory has been endlessly debated during the last several months. Some economists, including those for the National Association of Realtors and the National Association of Home Builders, dispute that prices have appreciated too rapidly, and that the real estate market is like a bubble ready to burst.

Low interest rates, and population demographics, will continue to boost the housing sector, according to those economists, and the low supply of homes for sale and building restrictions that exacerbate the supply problem will keep the market healthy. They also theorize that the real estate market is more like a balloon that might deflate as the market stabilizes but won’t pop.

“Demand is just way too strong for me to believe a bubble is going to burst,” said Drinkwater.

Drinkwater, who owns Grand Gables Realty Group in Scituate, said he has not noticed a dramatic market shift in the region he serves, even though he said the higher-end market in other parts of the state has suffered because the buyer pool for those homes has diminished. Those buyers, he said, were most affected by stock market losses.

But Drinkwater said that as long as communities continue to restrict housing development, the job market stays steady and interest rates don’t escalate, buyer demand will still be there.

To back up that theory, Drinkwater cited the favorable demographics that will help the real estate market – including the growing number of immigrants, the baby boomers who want to downsize, and the baby boomers’ children who are and will continue to search for their first homes.

“Anybody who is saying that the bubble is going to burst doesn’t know what he’s talking about,” agreed Zide.

Zide said the market has returned to “normal” after being “abnormal” for three years. Zide did acknowledge that homes are staying on the market longer, and he is telling agents in his office to be more careful about pricing. But he maintained, “There’s absolutely, in my opinion, no bubble bursting.”

Other economists say that some real estate markets, including Boston’s, cannot sustain such high prices, particularly since prices have outpaced household earnings in most regions of the country. They maintain that interest rates will eventually rise, particularly if the nation goes to war and national debt mounts, and they worry that loose mortgage standards may have pushed many buyers into high debt.

Astute Realtors – even those who don’t believe that the housing market is a bubble on the verge of bursting – have taken notice of the changing tide and have started taking steps to prepare themselves. Many are rethinking prices and marketing time.

When agents do a comparative price analysis for a home they are preparing to sell, they should look at pending sales and homes that sold within the last two months, said Zide, not just homes that sold six months ago, which is a more common practice.

Moore, who is an agent at Re/Max Premiere Properties in Lexington, said the shifting market requires Realtors to evaluate every price and, in many cases, adjust prices.

In Lexington, the buyer pool for homes priced $1 million and above has almost disappeared because of downturn in the high-tech field. That has left many builders in a bind, because a lot of the million-dollar homes were in the pipeline before the dot-com bust, according to Moore. Out of about 100 properties currently listed for sale in Lexington, 33 of those are priced at $1 million or more.

“We had a lot of buyers [searching for homes] in those price ranges that aren’t there anymore,” said Moore.

In some cases, that has led to home price adjustments. But Moore said homes in Lexington priced in the $300,000 to $800,000 range are still selling quickly and drawing multiple offers.

“What I’m also seeing is that some properties are coming on [the market] at a very sharp price to generate more interest and to build up that enthusiasm,” she said. “But then you get a bidding war going on.”

Housing Market Shifts; Realtors Switch Gears

by Banker & Tradesman time to read: 6 min
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