The median selling price for single-family homes sold in Middlesex County reached $400,000 in 2004. This five-bedroom Colonial in Framingham sold for $530,000 in August.
It’s not just the cold snowy weather that’s driving Bay State residents to other parts of the country. With the median price for a single-family home climbing beyond $300,000 last year, a growing number of Massachusetts residents are finding the region’s growing home costs are freezing them out of the housing market.
Nearly half of Bay State residents or their immediate family members are seriously considering moving from the state because of rising housing costs, a recent poll shows. The poll results come as home sales and prices soared last year.
The median price for a single-family home in Massachusetts reached $327,000 in 2004, 11 percent higher than the prior year and a 63.5 percent increase from five years ago when the median price was $200,000, according to The Warren Group, parent company of Banker & Tradesman.
In Middlesex County, the median price for a single-family property escalated to $400,000, the highest median of any Bay State county with the exception of Nantucket and Dukes counties, where pricey vacation properties make up a significant portion of the housing stock. Home seekers searching for lower-cost housing had to go the western part of the state, where the median selling price was below $300,000.
Sales of condos, often seen as an alternative for first-time homebuyers, were also booming. Almost 30,000 condos were sold in the Bay State in 2004, an 18 percent spike from 2003. The median selling price for those condos jumped to $257,000 last year, 9.5 percent higher than the prior year and 72 percent more than the 2000 median price of $149,262.
“Entry-level housing is virtually extinct now in Massachusetts,” said Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association, noting that most families need two incomes to able to afford a home.
The surge in the residential prices is making some people toy with the idea of relocating to states with more affordable housing. The University of Massachusetts’ Donahue Institute conducted a public opinion poll in December for CHAPA that found that nearly 46 percent of respondents considered moving out of the state because of housing costs. That’s a significant increase from a similar poll that was conducted five years ago which showed that only 11 percent thought about leaving the state because of the cost of housing.
In the MetroWest region specifically, 51 percent of poll respondents said they were “very concerned” about the cost of housing in their area.
While low mortgage interest rates, more flexible underwriting and loan programs with lower down payment requirements have helped more people become homeowners, Greater Boston residents have been struggling with housing costs for the last three to four years, says Gornstein.
Business and political leaders, concerned about the state’s economic vitality, have focused on ramping up housing production as a way to moderate prices in the residential real estate market. But even as more housing has been built, prices have yet to stabilize.
“The housing supply is increasing modestly and prices are still going up,” said Gornstein.
“It’s unlikely that production is going to increase much higher than what it’s been,” especially since interest rates are expected to rise, Gornstein said. “The Romney administration has focused a lot on increasing housing supply, but there also needs to be increased attention to providing housing for those currently shut out of the market.”
Some real estate industry watchers maintain that the housing market will take a breather this year, with home prices flattening a bit. Mortgage interest rates, which national economists predict will edge upward this year, were a key factor fueling buyer demand last year.
“People saw that interest rates were low and were fearful that they were going to increase,” said Laurie Cadigan, president of the Greater Boston Association of Realtors.
Sales of single-family homes and condos rose for the third consecutive year.
Sales of single-family homes in Massachusetts jumped from 61,718 units sold in 2003 to 68,333 sold in 2004, according to The Warren Group. There were 29,957 condo sales recorded in 2004, up from 25,373 sales the prior year.
The median selling price for a single-family home last year rose 11.4 percent to $327,000 from $293,500 in 2003, while the 2004 median selling price for condos, $257,000, was 9.5 percent more than the prior year.
Rising prices are changing buying patterns throughout the state, according to local Realtors. Buyers priced out of homes in the Greater Boston region are heading to suburbs and communities in the western part of the state.
They’re searching beyond Route 128 and Interstate 495, settling for longer commutes and compromising on home size, location and the amount of land they purchase, said Cadigan.
The makeup of communities are changing as result. “We’re not seeing the diversity in our towns that we have seen in the past,” acknowledged Cadigan, a real estate broker with Barrett & Co., which serves the pricey Concord, Carlisle and Lincoln markets in Middlesex County.
In the poll conducted for CHAPA, over 53 percent of residents statewide reported that the amount of their monthly housing payment makes it hard to make ends meet. Six out of 10 respondents felt that housing costs were forcing teachers and firefighters to live outside of the town in which they work. In addition, 82 percent of residents of in Boston’s Metrowest area said they felt housing costs prevent young people from living in towns in which they were raised.
Sustainable Trend?
Mark Lippolt, executive vice president and general sales manager of Coldwell Banker Residential Brokerage Central New England, said consumers are dealing with rising home prices by expanding their housing search to communities like Shrewsbury and other towns in the central and western parts of the Bay State. And some buyers, particularly first-time homebuyers, are opting to purchase condos, which are generally more affordable than detached single-family homes.
Lippolt also noted that buying patterns in Massachusetts and all across the country have changed as household makeup has changed. Thus, even though the state’s population declined slightly last year, the state added a variety of household types, including single men, single women and gay and lesbian couples, who were out looking for real estate, said Lippolt.
“One of the things that have pumped up condo sales and single-family home sales are the fact that single women are a significant part of the buying pool right now,” he said.
Still, Lippolt said he was very concerned about the UMass poll results, and maintains that price appreciation will have to dip this year and in coming years to reflect slowing growth in salaries.
“There’s no question that at some point we need to have housing appreciation fall more in line with salary increases,” said Lippolt. “It’s a trend that can continue for a number of years, but can [it] continue indefinitely?”
Lippolt said it’s important to note, however, that Massachusetts residents don’t rely solely on salary income. “Massachusetts residents consistently rank in the top 10 states nationwide for income derived from interest and dividends. We are a state that’s less dependent on salary increases for purchasing real estate than other states nationwide,” he said. “That throws in a curveball when you figure out how affordable housing is to some people.”
Rita Gallant, president-elect of The Realty Guild and one of the broker-owners of Plymouth Village, said young couples with dual incomes are stretching to purchase first homes.
“It’s a challenge, and it has been for a number of years to sell to the first-time buyers,” Gallant said.
