Massachusetts home prices are down another 13 percent, but forgive me if I am not ready to hit the panic button.
The numbers may conjure up images of suburban meltdown and abandoned deluxe condo towers in downtown Boston, but nothing could be further from the truth.
The fact is, there are two real estate markets in Massachusetts.
The suburbs and Boston’s downtown condo market are suffering from a run-of-the-mill downturn that, by national standards, is relatively mild. Some toney ZIP codes have even seen prices rise, not fall over the past two years.
By contrast, low income neighborhoods and cities across Eastern Massachusetts have been hammered by nothing short of a real estate depression. An epidemic of subprime lending sent prices soaring in lower-income urban areas during the boom, but they have come down hard and fast with the downturn.
A list of the hardest hit communities in the state, in terms of home price declines over the past two years, includes a who’s who of struggling industrial cities and urban neighborhoods.
Is it fair that poorer neighborhoods are bearing the brunt of the downturn? Absolutely not. Should more be done to help those neighborhoods and cities where whole blocks are riddled with foreclosures? You bet.
Boston’s Brewing Bounce Back
But am I packing up my Natick fixer-upper and getting ready to head for Vermont, convinced the end is near for the greater Boston real estate market? Give me a break.
Frankly, no one should be sweating the fate of Boston’s suburbs or the temporarily oversaturated downtown condo market. Both will bounce back just fine.
In fact, it’s been the relative strength of some of our upper-end suburbs and the downtown condo market that has made the Boston metro market a standout of sorts nationally. The 8 percent fall in prices the Boston area saw in the latest Case-Shiller report for the first quarter was one of the shallowest declines of the 20 metro markets tracked.
But the same can’t be said for hard-hit areas like Dorchester’s Hendry Street, which are battling a deadly undertow of foreclosures and plunging prices.
A look at the numbers is revealing.
I had my friends at The Warren Group, publisher of this paper and a major source of local real estate data, crunch some numbers for me.
It’s a list of towns and neighborhoods across the state, ranked from the biggest declines in home values over the past two years at the top on down to those lucky towns and neighborhoods that have actually seen prices rise, not fall, during the downturn.
And while it’s hard to generalize, one trend is clear: The old industrial cities that dot Eastern Massachusetts, as well as the lower-income neighborhoods clustered in and around Boston, can all be found at the top of the list when it comes to plunging home prices.
Roxbury, Mattapan, Chelsea, Brockton, Lawrence, Fitchburg, Lynn have all seen home prices plunge anywhere from 30 percent to 50 percent over the past two years. And there are plenty of other urban areas that have posted losses of more than 20 percent, including, Fall River, New Bedford and Framingham.
Condo Crisis
And condo markets in some of these neighborhoods have collapsed even more dramatically.
Home values in Mattapan have fallen nearly 50 percent over the past two years, to $162,000. But condo prices in the neighborhood have positively cratered, plunging to a shocking $55,000 from $261,000 two years ago.
The bottom has also fallen out of the Dorchester condo market as well, with a median sale price of $99,000 today compared to nearly $300,000 three years ago.
The common denominator in many of these urban real estate markets was a flood of subprime lending that helped drive prices to unsustainable levels during the boom.
Then came the meltdown of the subprime market, which flooded many of these smaller industrial cities and urban neighborhoods with foreclosures.
While there are certainly foreclosures in the suburbs, neighborhoods like Dorchester have borne the brunt, with multiple foreclosures on some hard-hit blocks. (At one point, Dorchester, Roxbury, Mattapan and part of Hyde Park were accounting for 80 percent to 90 percent of all foreclosure filings in Boston.)
There’s nothing comparable to this in the suburbs, certainly not in the pricier towns, and in urban areas, it is nothing short of a pricing disaster.
A single foreclosure can bring down prices in a neighborhood, but a cluster will trigger a wholesale price collapse
On the other end of my list are the fortunate few, those towns and communities where prices have either declined minimally or have even gone up over the past two years, pulling off the seemingly impossible during the real estate downturn.
While it’s a mixed bag, you’ll see some familiar names. Cambridge, Brookline, Winchester, Sherborn and Hingham have seen home values rise from half a percent to nearly 13 percent, in the case of the hometown of Harvard and MIT.
Others have been prices stay stable, or post modest declines. Lexington stayed put at $663,750, while Nantucket, Wellesley, Weston and Newton all saw extremely mild declines in home prices ranging from .43 percent for Nantucket to 4.7 percent for Weston.
“It is clear that the more affluent communities stood a much better chance of having gains in their median price,’’ notes Timothy Warren Jr., chief executive of The Warren Group.
By contrast, poorer urban areas face a “double whammy’’ as a rising tide of foreclosures accelerates the price declines, Warren notes. “One foreclosure on a street brings it down, but when there are a whole bunch of them, it’s even tougher to get a fair market price you are happy with.’’
The fact is that simply panicking over the median sale price for broad and varied state like Massachusetts – and not looking closely at what goes into that number – does little to help anyone.
Sadly, the luxury market,s flesh wounds and falling prices in some suburbs will garner the most of the attention, without a careful examination of the facts.
But unless there is some incredible yarn of fraud involved, you are not likely to hear much about the real estate meltdown in lower income urban neighborhoods across the state.
This is a giant – and tragic – case of misplaced concern and attention.
