The housing market downslide isn’t over yet. Sales and prices for both single-family homes and condominiums in Massachusetts declined during the first half of the year.
Single-family home sales through June were down 4.2 percent compared to a year ago, while the median selling price dipped 3.6 percent to $318,000, according to a report to be released today by The Warren Group, Banker & Tradesman’s parent company. Condo sales declined 5.6 percent for the same period and the condo median price slipped 3.6 percent to $270,000 during the same period.
“This is a period of painful adjustment for many homeowners, especially for those who financed their houses recently with subprime loans. Now many of those households are being put in a bind and are unable to refinance because they don’t have equity in their homes,” said Alan Clayton-Matthews, associate professor at the McCormack Graduate School of Policy Studies at the University of Massachusetts at Boston.
While some in the real estate industry have been insisting that the housing market is nearing the bottom, Clayton-Matthews said he doesn’t foresee a recovery anytime soon. An excess supply of unsold homes, rising foreclosure and delinquency rates in Massachusetts and across the country, as well as an increase in mortgage rates and a tightening of lending standards, are helping to weaken demand and home prices, according to Clayton-Matthews.
“I don’t think we’re at the bottom yet,” he said.
A total of 25,435 single-family homes were sold statewide during the first half of the year, down from 26,558 last year, according to The Warren Group. At the same time, there were 14,375 condo sales, compared to 15,222 during the first six months of 2006.
The decline is being felt by real estate companies throughout the state. For example, Whitinsville-based ERA Key Realty Services, which has offices in eight communities, has seen its dollar volume plunge by more than 24 percent so far this year.
Bruce Taylor, the firm’s president, said the company handled $150 million in sales through May of this year compared to $198.5 million during the same period in 2006 and $204 million through May 2005 – which was the best five months ever for the company.
“We’ve been cutting back staff and services and facilities and trying to keep everything working as well as we can,” he noted. “There’s no question that changes have to be made in a market like this.”
Taylor said despite the fact that the economy is strong, and employment is stable, consumer confidence appears to be lacking.
“The elements seem to be in place for some recovery, but it’s going to be up to the consumer,” he said.
‘Very Worthwhile’
Realtors note one healthy sign – the number of homes listed for sale has declined.
At the end of June, there were 38,018 single-family homes listed for sale, a 7.7-month supply at the current sales pace, according to the Massachusetts Association of Realtors. During the same month last year, there were 44,175 homes listed for sale, representing an 8.4-month supply. In May, there were 36,857 single-family homes listed for sale, which was a 9.5-month supply.
But high home prices still continue to plague the Bay State. Home prices in Massachusetts rose sharply in recent years and outpaced incomes creating an affordability issue, according to economists. The median selling price for a single-family home jumped 72.5 percent from $200,000 in 2000 to $345,000 in 2005, according to The Warren Group. Last year, the median home price fell to $325,000, a 5.8 percent decline from the prior year.
Despite the recent decline, Clayton-Matthews said home prices in Massachusetts are still “way out of line with the rest of the country” and can’t be sustained. The home price-to-income ratio is much higher than the nation’s and needs to fall closer to the national level, just as it did following the last market correction in the early 1990s, he said.
But Clayton-Matthews noted that the market adjustment will be good for the overall economy, because lower home prices may help the state retain and attract workers.
“That’s going to do a lot to repair the cost-of-living disadvantage we’ve had and help the state expand its labor force,” he said.
Mel Martocchia, owner of Martocchia & Co. Realtors in Waltham, said home prices had risen substantially and it got to a point where “the market [had] to catch up with itself and perhaps take a breather.”
Market conditions, he pointed out, vary from community to community. While sales have fallen statewide, Waltham has seen its single-family home sales jump during the first half of the year compared to last year. A total of 150 single-family homes sold through June in Waltham, up from 130 in 2006, and there are 94 homes listed for sale compared to 144 last year, according to Martocchia.
But the median price for single-family homes sold in Waltham is $412,000, down from $420,000 last year.
Martocchia said he views that change as a period of adjustment after a run-up in prices.
“If we look at anything that we’ve learned over time, it’s that real estate has always been very worthwhile to own,” he said. “You’re not going to buy a house because it’s going up or down in value. You’re going to buy it because you need a place to live.”
