MARK HUTCHINSON
‘Buyers have more time’

Bay State Realtors are blaming everything from unsustainable price appreciation in recent years to this spring’s torrential rainfall for the sharp decline in single-family home and condominium sales in July.

As first reported on Banker & Tradesman’s Web site (www.bankerandtradesman.com) last Tuesday, single-family home sales plummeted nearly 27 percent and condo sales dropped more than 23 percent in July compared to the same month last year. The decline in July home sales is the steepest year-over-year monthly drop since April 1995, according to statistics from The Warren Group, parent company of Banker & Tradesman.

“The market is correcting,” said Tom Marquis, who has been in real estate for more than 30 years and owns Marquis Real Estate GMAC, which has offices in Duxbury, Plymouth, Brighton and Wareham. “We needed some correction here in the market.”

The median price for single-family homes sold in July of this year fell 6 percent to $339,000 from $361,000 in July 2005. July’s prices backpedaled even below levels recorded in July 2004, when the median price for single-family homes sold was $340,000, according to statistics from The Warren Group.

Meanwhile, the median price for condos sold last month was $277,700, or 4 percent lower than a year earlier.

Marquis views the modest price decline as a positive sign of a market that is gradually changing instead of rapidly unraveling.

“A knowledgeable buyer can do better today than they did yesterday, so that’s good. It can’t always be a seller’s market – it’s not healthy,” he said.

A total of 5,070 single-family homes and 2,692 condos were sold in Massachusetts last month, according to The Warren Group. July’s home and condo sales were lower than the prior month, when 6,491 single-family homes and 3,565 condos were sold.

Edmund “Gil” Woods, a Holyoke Realtor and past president of the National Association of Realtors, said the drop-off in sales and prices has occurred after a period of unsustainable growth in some regions of the state and across the country.

The most substantial decline in prices and sales is occurring in areas that experienced the biggest surge in home values in recent years and where prices have far outpaced what people can afford to purchase, explained Woods.

“You can’t keep raising prices [for homes] 15 percent, 20 percent and 30 percent year-in and year-out or you’ll run out of buyers who can afford them,” he said.

Woods pointed out that some pockets of Massachusetts are faring better than others.

In the Connecticut River Valley, for example, single-family home sales from January through July in Hampden County crept up 2 percent compared to the same months last year, while sales in Franklin and Hampshire counties fell 10 percent and 6 percent respectively during that period, according to The Warren Group.

Hampden County includes communities like Holyoke and Chicopee, where homebuyers can still find “a reservoir of reasonably priced homes” they can afford, Woods said.

According to Woods, home sales in the lower Pioneer Valley haven’t fluctuated dramatically because the region has maintained its employment base and experienced steady home price appreciation instead of the double-digit gains that other parts of the state saw.

“We didn’t have that kind of appreciation that you had on the Cape and the Boston area,” he said.

Home sales in Barnstable County – the Cape Cod area – plunged 20 percent during the first seven months of the year from a year earlier, and in Suffolk County, which includes Boston, sales were down 14 percent during the same period.

Since homes sales recorded in July typically reflect purchase-and-sale agreements that were signed two to three months earlier, sales could be off because of the record amount of rainfall that drenched Massachusetts in April and May, according to some Realtors.

“That’s the simple explanation,” said Fred Meyer, owner of University Real Estate in Harvard Square. “The more complex explanation is that prices had gotten out of line with the fundamentals of what it would cost to rent the same place Â… It used to be that you could buy a place for roughly what it would cost to rent it.”

Housing costs escalated so high and now that they are starting to ease, some buyers are taking a wait-and-see approach, he explained.

Meyer’s advice to consumers is to calculate and compare the costs of buying versus renting to determine whether it’s a good idea to purchase a home.

“It really is important when buying a home to ignore all the cocktail-party chatter about markets being up or down. Just look at your options for renting and buying and then compare your after-tax monthly costs for each,” he wrote in an e-mail.

‘A Buyer’s Market’
Melrose broker Mark Hutchinson said the rainy spring weather and the uptick in interest rates earlier this year may have affected July home sales.

Many homeowners who were simultaneously trying to sell their homes while searching for a new one to purchase actually have stopped house hunting until they sell their own property.

“The inventory is up and the demand has gone down so buyers have more time to make a decision,” said Hutchinson, who works at Brad Hutchinson Real Estate. “[But] I don’t believe that we’re in a bad real estate market. When you’re purchasing something that’s one of the single-biggest purchases in your life, you want to be able to take your time.”

Buyers in many parts of the state have a wider selection of for-sale properties from which to choose, which has helped moderate prices, according to local real estate agents.

In the Greater Newburyport area there were about 775 homes listed for sale in July, a significant jump from the approximately 460 homes that were available a year earlier, according to Kevin Wallace, a Realtor with Stone Ridge Properties in Newburyport.

“It’s seems like every third house has a for-sale sign,” he said. “It’s clearly a buyer’s market.”

But Wallace said sellers are recognizing the shift in the market and being more realistic about pricing. “Sellers are really starting to come around, and that will level the playing field over the next few months.”

The statistics reported by The Warren Group show continuation of a downward trend in the residential real estate market this year. Statewide home sales were down 13.3 percent through July of this year compared to the same months in 2005, while condo sales were off 9.5 percent. Essex County saw home sales fall 16.6 percent in those months. Plymouth County sales were off 16 percent, while Middlesex County sales were down 14 percent.

Marquis said he expects that sales numbers will improve in September and October based on the amount of activity he’s seen in the first two weeks of August.