This map highlights communities in Massachusetts with at least 25 home sales where the single-family median home price fell 10 percent or more year-over-year during the first three quarters of 2006.
Homeowners in Boston-area suburbs like Brookline, Dover and Lincoln could boast last year that they were part of an exclusive group of Bay State communities where the median home price was more than $1 million.
Now, with home prices falling more than 10 percent in the three sought-after towns, the median price has dipped below $1 million and those elite communities have company.
After shooting up sharply, median prices in 33 communities across the Bay State with at least 25 home sales dropped more than 10 percent during the first three quarters of the year. A third of those communities are located in central Massachusetts, according to information from The Warren Group, parent company of Banker & Tradesman.
Those steep declines come at a time when the median price for single-family homes sold from January through September statewide has dipped 5 percent after a six-year period of robust price appreciation.
“There has clearly been a sea change,” said economist Karl E. Case, who noted that the spread between what buyers are offering for properties and what sellers are asking is so wide that it’s affecting home sales activity.
Case said consumer confidence and the psychology surrounding the housing market have plummeted. “Two years ago, no one believed property values ever fell. Now everyone thinks the bubble has burst,” said Case, a professor of Wellesley College and a founding partner of the real estate research firm Fiserv Case Shiller Weiss Inc.
Some Bay State communities that have seen their median home prices stumble this year have had home values surge from 55 percent to 97 percent over the last five years. Statewide, the median 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.
Unlike the last housing downturn, when regions across the country experienced the boom and bust at different times, this time around demand for housing is down across the country, inventories of unsold homes have built up and prices are falling in most cities, said Case.
In Worcester County, 11 communities saw their median home prices plunge more than 10 percent in the first three quarters compared to the same period in 2005. Some communities in the region have seen tremendous growth over the last several years, and new home construction has helped prop up prices. But as homebuilding has started to slow, prices have begun slipping.
“Worcester County was the best-kept secret for many years as affordable and easily commutable. The word got out and here we are,” said Daniel Robertson, who serves as president of the Worcester Regional Association of Realtors. “We have seen record growth in all areas of real estate, not just the housing component.”
In Millbury, the median home price has nearly doubled in the last five years – from $149,900 to $296,500 last year. But during the first three quarters, when 93 homes were sold in the town, the median selling price fell 16.5 percent to $250,000.
Robertson, an agent with Coldwell Banker Residential Brokerage in Westborough, said Millbury has been the focus of real estate development because of the construction of Route 146, which connects to the Massachusetts Turnpike and Interstate 290. The transportation project opened up the area for developers, he noted.
‘Pristine Condition’
Another community in central Massachusetts where newly built homes have helped drive up prices is Mendon. Median prices have jumped 53 percent, from $299,900 in 2000 to $459,000 in 2005. But the median price for the 38 homes sold in Mendon during the first three quarters dropped 15 percent to $383,500 from $452,000 a year earlier.
Carolyn Chodat, who owns Classic Properties in Medway and Milford, said with the exception of one small subdivision in town, there are few newly built homes on the market in Mendon now. “At this point in time, there’s no other new construction,” said Chodat, noting that a 55-home subdivision that’s been approved won’t break ground until late winter or early spring.
Given that many communities saw double-digit price gains over the last several years, a drop in prices is not catastrophic, according to Paula Savard, owner of Paula K. Aberman Assoc. in Lancaster.
“In the past, we had eight buyers to every seller. Buyers were driving the prices up,” she said. But now, with a supply of homes for sale increasing over the last 18 months, the frenzy has eased.
Savard said in the communities that she serves, including Lancaster – where the median price for single-family homes sold during the first three quarters dropped 13.7 percent from a year earlier – most buyers also are looking to sell a home. That has created a log-jam, according to Savard. “Everyone has to wait until they can get a buyer for their home,” she said.
Today, homebuyers are searching for properties that are in really good condition and need little work and they’re also searching for a reasonable price, according to Angela Harkins, a Realtor with RE/MAX Prestige who serves Westford and Littleton.
“The home really has to be in pristine condition and it has to be priced right to sell,” said Harkins.
Harkins, like other Realtors who were interviewed by Banker & Tradesman, said the housing slump has been fueled in part by a flood of news reports on the downturn in sales and prices.
“Perception becomes realty. The more the media says it’s a buyer’s market, the more it becomes reality,” she said.
Tom Courtney, a broker with Keller Williams Merrimack Valley in Westford, echoed those remarks.
“I think in any market, whether it’s the real estate market or the stock market, perception is reality,” he said.
Some buyers think that home prices will fall even more and are waiting to make a purchase. Littleton and Westford saw their home prices climb more than 50 percent from 2000 to 2005.
In Littleton, the median home price has decreased 18 percent to $378,900 in the first nine months of 2006, while in Westford the median price was down 17 percent to $425,000.
But Courtney said now is the ideal time to buy. “You’ve got a good supply, and you’ve got great interest rates, and I think you have good value,” he said.
Closer to Boston, Dover’s median home price has tumbled 14.5 percent to $897,500 in the first three quarters of 2006, after surpassing the $1 million mark for the first time last year.
Jay Hughes, broker-owner of Dover Country Properties, said he didn’t think the $1.06 million median price of last year was sustainable. A number of estate properties and large newly built homes were sold last year, which helped push up home price data in Dover, according to Hughes.
“I think the housing market in Dover basically echoes the economy in general. Prices had risen significantly over the last several years. It was probably time for a correction,” he said.
In Brookline, where million-dollar properties are no rarity, the median price for the 146 homes sold from January through September fell 14.7 percent to $944,750 from more than $1.1 million a year earlier.
Holly Wyner, an agent with Hammond GMAC Residential, said the real estate market in Brookline was “stagnant” last fall but buyers who were waiting on the sidelines emerged in the first quarter, leading to brisk activity during the first four months of the year.
As news started spreading about the housing market slowdown, the inventory of for-sale homes crept up and prices started to ease, she said.
But Wyner said she believes that the market will rebound again. Within the last two weeks, four homes priced between $2.4 million and $3.5 million in Brookline that have been on the market for more than six months went under agreement.
“Certain buyers are out there and they’re realizing that prices are more attractive than one or two years ago,” she noted.
Chobee Hoy, a longtime real estate broker in Brookline, said she has seen “a real pickup in sales” with some homes selling for more than the asking price in the last month.
And Hoy, who owns Chobee Hoy Assoc. in Brookline Village, said unlike other times when the market was down, buyer demand still exists.
“I’ve lived through markets where there were no buyers. That’s not true now. There are many people out there that I believe are real buyers, not just lookers,” she said.
