Sales of two- and three-family homes rose in several Bay State communities last year, including Worcester. This two-family home located on Henry Street in Worcester is on the market for $175,000.

Spurred on by first-time and foreign-born homebuyers as well as investors, sales of multifamily homes in Massachusetts continued their upward climb last year.

Sales of two-family homes in Massachusetts increased 7 percent from 2002, according to The Warren Group, parent company of Banker & Tradesman, which collects home sale statistics from the registries of deeds throughout the state.

A total of 8,376 two-family homes were sold last year, up from the 7,828 two-family home sale transactions recorded in 2002. The median price for a two-family home shot up nearly 17 percent to $274,000 last year from $235,000 the prior year.

Sales of three-family homes statewide, however, slipped 1.3 percent to 3,823 from 3,877 in 2002, but the median price for three-family homes rose 22 percent to $305,000 from $249,900 during that same timeframe.

Combined there were 12,199 two- and three-family homes sold last year, a 4 percent increase from the 11,705 homes sold in 2002, according to The Warren Group.

Multifamily home sales were particularly strong in urban areas including Worcester, Springfield, Quincy and some Boston neighborhoods.

‘Strong Demand’

First-time buyers and investors have been driving the sale of multi-unit homes in Springfield, explained Kevin Sears, president-elect of the Realtor Association of Pioneer Valley.

First-time buyers find multifamily homes attractive because they can get help paying their home mortgage by renting one or more of the property units, said Sears, while investors from the Boston, Worcester and New York City areas are flocking to Springfield where residential real estate is more affordable.

In addition to investors and first-time buyers driving sales, Sears said he has noticed that many longtime property owners have sought to sell their multi-unit homes to benefit from the strong price appreciation in recent years.

Demand for multifamily homes in Springfield was strong enough to drive the median price for a two-family home up 15 percent to $100,000 last year from $85,000 in 2002, according to The Warren Group. Price appreciation was even steeper for three-family homes. The median price for three-unit properties escalated 25 percent to $113,166 in 2003 from $85,100 the year before.

In Springfield, sales of two-family home sales rose 9 percent, from 576 in 2002 to 629 last year, while sales of three-family homes shot up 37 percent to 188 unit sales compared to 137 in 2002.

The Realtor Association of Pioneer Valley reports that there were 874 sales of two- to four-unit properties in Greater Springfield last year, which was a 12 percent increase from the 781 sales transactions recorded in 2002. In that time, the average price of homes with two to four units rose 15.4 percent, from $110,403 to $127,469.

“I expect that we’re going to continue to see a strong market,” said Sears, an agent with Sears Real Estate in Springfield.

“The multifamily housing market is more popular than ever among traditional homebuyers,” said Massachusetts Association of Realtors President Judy Moore in a press release. “Two- and three-family homes have become increasingly popular among first-time buyers faced with the escalation in prices and limited inventory of starter homes in the single-family home market. We’re also seeing strong demand in this market from many of the state’s foreign-born residents, many of whom are recent immigrants who have settled in Massachusetts with their extended families and want to live within close proximity to one another.”

According to MAR, a total of 8,088 two-, three- and four-family homes were sold in Massachusetts last year, an 8 percent increase from the 7,481 multifamily home sales in 2002. MAR reported that was the largest annual gain in two- to four-family home sales in four years.

Jane Fine, owner of Fine Properties in Worcester, has witnessed the strong buyer demand for multifamily homes. Last month, her office listed five three-family homes in Worcester. All of them were under deposit within three weeks.

“It just was instant,” she said.

Her office also recently listed a completely renovated four-unit home that attracted two offers for the full asking price on the first day it went on the market.

Even homes that have major structural problems are selling quickly, Fine said.

In Worcester, 332 two-family homes were sold last year, a 34 percent increase from the prior year when 247 two-family properties were sold. The median price for a two-family home rose 10 percent to $198,000 from $178,000 in 2002.

Sales of three-family homes totaled 473 in 2003, only a 4 percent increase from 2002 when 457 such homes were sold. Meanwhile, the median price for a three-family home jumped 23 percent in that period from $199,000 to $260,000.

Fine said many of her clients are investors who do a “1031 exchange,” which refers to a tax law that allows property owners to exchange one property for one of another kind and stall or delay any gains tax.

But Fine’s office also works with foreign-born buyers and single women who purchase multifamily homes with family members.

In Quincy, Mary E. Dawson, sales manager of Century 21 Annex Realty in Quincy, said she has also noticed a trend of extended families pooling their resources together to purchase two- and three-family homes. The median price for the 172 two-family homes sold in Quincy last year was $419,500 – a 17 percent increase from the $346,900 median price posted the prior year.

Many younger first-time homebuyers who have participated in homebuying workshops organized by local nonprofit groups in Quincy are finding that multifamily homes are good investments. “They’re informed and educated buyers,” said Dawson.

While sales of two-family homes in Quincy were up 47 percent last year, sales of three-family homes dipped from 28 homes sold in 2002, to 24 such sales last year. Dawson said two-family homes are more common in Quincy than triple-deckers.

While buyers are not willing to overpay for a home, some multifamily homes still attract multiple offers, particularly those near the MBTA, as long as they’re not “outrageously” priced, explained Dawson.

Open houses for two-family homes that are on the market are attracting up to 30 different potential customers, said Dawson, and homes in Quincy are generally selling within a month.

Meanwhile, sales of multifamily homes in more southern urban centers like Fall River and New Bedford were either flat or experienced a slight drop.

Sales of two-family homes dipped 1 percent in New Bedford, from 200 sales to 198 last year, while sales of three-family homes fell 8 percent to 192 from 209.

Median prices for both two- and three-family homes in New Bedford, however, jumped more than 30 percent, indicating that demand for such properties hasn’t eased. The median price for two-family homes sold in New Bedford last year was $184,950, or 32 percent higher than 2002 when the median price was $126,250, and the median price for a three-family was $224,500, 33 percent more than $150,000 median of 2002.

In Fall River, sales of two-family homes were flat, with 100 sales posted in 2003, compared to 101 in 2002. Sales of three-family homes, however, fell 14 percent from 162 to 139 during that time.

But as in New Bedford, multifamily home price appreciation in Fall River was strong. The median price for two-family homes sold in 2003 was $198,395 – a 22 percent increase from the prior year when the median was $155,000. The median price for three-family homes sold last year jumped 29 percent to $239,900 from $170,450.