Talking to home buyers and agents inside the 128 belt, you may hear a familiar tale of desperation during this strong spring market: Shockingly low inventory, cut-throat multiple bid offers, and eye-popping new sales price highs. Indeed, a look at the Boston market in particular — where a new luxury skyscraper seems to be on the rise every other block — may make it seem like the residential market has never been better. But taking a step back shows a different picture.

Across most of the state, home prices are still lagging far behind their mid-2000s peak.
Bay State home prices peaked in mid-2005, according to data provided by The Warren Group, publisher of Banker & Tradesman. A comparison of median single-family home prices from September 2005 with the first quarter of this year tells the tale. In the red-hot market of the Hub itself and some nearby suburbs, home prices have soared well above their former peaks. A pied à terre on Beacon Hill will cost you a much prettier penny than back in 2005: the median single-family home prices in the heart of Boston itself is more than a million dollars higher than it was in 2005, rising from $1.3 million to $2.3 million.

Brookline and Cambridge aren’t too far behind, with the median single-family price soaring by nearly $600,000 in each city over the past 10 years. Towns like Wellesley, Concord, Somerville, Arlington, Needham and Lexington have also seen the median single-family sales price rise by more than $100,000 in the past decade.

But the vast majority of Massachusetts cities and towns are still well below the highs of a decade ago. Even excluding towns with only a handful of sales through the first quarter, in 232 of the 368 Massachusetts municipalities tracked by the Warren Group, or 63 percent, prices remain below peak, with 135 municipalities, or 36.7 percent, having median prices $50,000 or more below their former highs. At the county level, only Nantucket has surpassed its decade old-highs, with current median single-family prices $250,000 above their former levels. In contrast, in Worcester County, no town with five or more single-family sales registered a higher median sales price than the peaks of 2005.

Even in a strong market, buyers are still cautious about overpaying.
“Down here in the South Shore, our inventory is still very low,”  said Rosemary Sullivan, an agent with Jack Conway & Company in Hingham. Sullivan said she’s seeing a strong spring market, with multiple offers, higher down payments and some willingness on the part of buyers to waive contingencies and even inspections. But as far as prices returning to the boom-era craziness, “I don’t think we’re there yet,” she said.

It could be several more years before prices fully return. During the late 1980s, single-family home prices rose to a peak median price of $162,000 across the Bay State at the height of the market before crashing in the early 1990s, falling to a nadir of $139,500 in February 1991. It wasn’t until 1997 that the statewide median reached its former high, according to Warren Group data.
But that peak-to-trough crash was a decline of 13.8 percent; our more recent housing bust was a much longer and bumpier fall, with the median price going from a high of $370,000 across the state in August 2005 to a nadir of $245,000 in February 2012, a peak-to-trough decline of 33.7 percent. That suggests that even as Boston itself continues to steam ahead, the rest of the state may be a long while yet in catching up.

And long-term demographic shifts may be making it more difficult for single-family prices to return. With a large wave of Baby Boomers trying to downsize at the same time as more and more Millennials are trying to stick close to the city and waiting longer to start families, growth in single-family prices may be slower, especially outside of 128, said Barry Bluestone, a professor of economic at Northeastern.

“I think you could have two kinds of suburbs. One the kind with extremely good schools – I wouldn’t be surprised to see their home prices rise and keep rising,” he said.
But for those communities which aren’t as successful at attracting young professionals and families, there may be a limit to how high prices can rise, he suggests. “It’s just basic economics tied to basic demography,” Bluestone said.