LAWRENCE YUN
‘A more notable drop’
New England’s housing market may be one of the first to emerge from the national slump.
“The New England region, in relation to the rest of the country Â… has seen a more notable drop in [housing] inventory. So I think the New England region will be one of the first regions that has been slumping to come out of the recession,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR). Yun delivered his economic outlook to about 120 agents and brokers attending the New England Realtor Conference at the Charles Hotel in Cambridge on Monday.
Despite Yun’s predictions, some economists are forecasting prices in New England to continue to decline through the year and begin to recover in 2009.
Alicia Sasser, senior economist for the Federal Reserve Bank of Boston, said the abundant supply of for-sale homes and the increase in foreclosures is putting pressure on prices.
But Sasser noted that Boston’s price declines haven’t been as sharp as other regions. Boston area home prices fell 3.4 percent last year, while metro areas like Las Vegas, San Diego and San Francisco have had price drops of 10 percent or more, according to the S&P/Case Shiller Home Price Indices.
“The S&P Case/Shiller Price index shows that in the Boston area, prices have grown slower or fallen faster than the average among the composite 10 and composite 20 metro areas since 2003 but more recently Â… although Boston house prices continue to decline, the depreciation was not as great as that experienced by the other metro areas in those indices,” she said.
Statewide, home prices fell in January. The median selling price for a single-family home dropped 4.4 percent to $325,000 from $340,000 in January 2007, according to The Warren Group, parent company of Banker & Tradesman. Condo prices slipped 1.5 percent to $270,000 during the same period.
And the number of for-sale properties continues to be a concern.
In Massachusetts, there was an increase in inventory in January. There were 44,540 residential properties on the market at the end of January, 4 percent more than a year earlier, according to the Massachusetts Association of Realtors.
Nationally, there were over 4 million existing, or resale, homes on the market as of January, up from just under 4 million during the same month last year and under 2 million in 2001.
Yun said the existing-home inventory is very high, but it’s not “alarming.”
But Yun did express concern about buyers’ confidence in the housing market. He said there are many buyers who have the capacity to purchase homes but are holding back because of the negative news on housing.
“If buyers continue to sit on the sidelines, hold back, then naturally the inventory will build and when the inventory builds, you will further press prices down,” Yun said.
The supply of newly constructed homes fell to under 500,000 in January as builders have curtailed construction.
“New-home construction has been sharply declining,” Yun said. “When new-home construction activity is falling, this is a positive for [the] housing market. Currently we have high inventory conditions. The last thing we want to do is add on more inventory when the inventories are already high. So the fact that the builders are cutting back production is helping to stabilize the market conditions.”
NAR forecasts existing-home sales to total 5.38 million this year, down from 5.65 million in 2007. The group also expects prices to dip 1.2 percent this year before climbing 3.2 percent next year.
