Real estate industry watchers hoping for a big rebound in Bay State home prices will have to wait some more.
Prices for single-family homes and condominiums statewide fell 3 percent and sales slipped during the first quarter, according to The Warren Group, parent company of Banker & Tradesman.
The median price for single-family homes sold during the first three months of the year dropped to $310,000 from $320,000 a year ago, while the median selling price for a condo dipped to $265,000 from $274,000 during last year’s first quarter. Price drops were even steeper in Plymouth and Franklin counties, where single-family home median prices were down 6 percent.
The declines come after a sharp run-up in prices in prior first quarters. Bay State home prices escalated during every first quarter from 2000 to 2005, before dipping in 2006 and falling again this year, according to The Warren Group.
Industry analysts say the market shift was predictable, given the region’s sluggish job market and weak population growth.
The Greater Boston region’s population and job gains have lagged the nation’s for several years, putting a dent in housing demand, according to Ingo Winzer, president of a Wellesley-based firm that analyzes 100 U.S. real estate markets.
The region has had either no gains or losses in population over the last four years, and job growth in 2006 was 1.1 percent while the nation’s was 1.5 percent, Winzer explained.
“That has a strong effect on what happens with real estate prices,” said Winzer, who heads Local Market Monitor and predicts that a housing market recovery won’t happen anytime soon.
A total of 10,562 single-family homes were sold statewide in the first quarter, representing a slight decline – less than 1 percent – from a year earlier, The Warren Group reported. At the same time, condo sales fell 3.7 percent. A total of 5,960 condos were sold from January through March, down from 6,187 a year ago.
Only Dukes and Nantucket counties saw price jumps in the first quarter. The median single-family home price on Nantucket surged 13 percent to more than $1.76 million while the median price in Dukes County – Martha’s Vineyard – leaped 10.3 percent to $642,525.
In western Massachusetts prices flattened, with the median single-family home price in Hampden County rising almost 2 percent to $168,000 and remaining unchanged in Hampshire County at $240,000.
As they head into the height of the busy spring season, local Realtors are reporting that they are encouraged by a pickup in activity. Some say buyers who have waited on the sidelines are finally emerging, realizing that prices are more favorable and aren’t likely to drop much more, and that interest rates are still fairly low.
“For the most part, it seems like the market is stabilizing. Buyers are realizing that they have to be real tight with their offers on properties, and sellers are willing to commit to selling if they think offers are reasonable given the current market conditions,” said Doug Azarian, a Cape Cod broker and president of the Massachusetts Association of Realtors.
One positive sign, say Realtors, is that the number of homes on the market has dropped in some areas.
There was a 10.6-month supply of single-family homes available for sale in the first quarter, down from a 13.7-month supply a year earlier, according to MAR. In the condo sector, there was a 10.7-month supply, compared to a 14.1-month supply last year. A market that’s considered balanced between buyers and sellers has between 7.5 and 8.5 months’ worth of inventory.
“The inventory has ameliorated to some degree but we still have excess inventory in several communities,” said Mark Lippolt, executive vice president and chief administrative officer of Coldwell Banker Residential Brokerage.
Lippolt said several office managers and regional vice presidents have reported excess inventory in areas like Worcester and Greater Springfield.
“The one ongoing concern is inventory levels,” said Lippolt. “We monitor that constantly.”
Last spring, there was some “panic selling,” with sellers who were anticipating a downturn scrambling to move their homes, explained Lippolt. “That really had an impact on the market,” he said.
“If we can avoid that in 2007, I think we’re going to see a stable, opportunistic market – opportunistic in that sellers who are realistic and buyers who are not impacted by the subprime market will find that there are transactions that should be done,” he added.
Lippolt noted that he does see one bright side: Sales of properties priced $1 million and above have jumped in the first quarter, which he said shows consumer confidence among affluent consumers.
‘Strong and Resilient’
Sales of single-family homes and condos priced $1 million and higher jumped 25 percent in the first quarter compared to a year earlier, according to statistics provided by MLS Property Information Network.
A total of 402 condos and single-family homes priced $1 million and higher were sold in the Bay State from January through March, compared to 321 during the same period in 2006, according to MLS PIN.
But single-family homes in that price range took almost two months longer to sell. Homes with price tags of $1 million or higher that sold in the first quarter were on the market an average of 219 days, up from 163 days a year earlier.
High-end condos also took almost two weeks longer to sell. Condos in the $1 million-plus range that sold in the first quarter were on the market for an average of 145 days, up from 132 days a year ago.
“The upper end of the market is incredibly strong and resilient. That tends to favor communities and counties closer to downtown Boston,” Lippolt said.
Indeed, Middlesex and Norfolk counties – which include cities and towns in close proximity to Boston – saw home sales jump and prices fall by only 2 percent during the first three months of 2007.
In Middlesex County, single-family home and condo sales were up by 6.5 percent in the first quarter. In Norfolk County, single-family home sales rose by almost 1 percent in the first quarter while condo sales climbed 3.7 percent.
Lippolt said he is optimistic about marketplaces closer to Boston because “there is a lot of wealth centered in those areas” and because the industries that provide jobs in those markets – universities, hospitals and financial services – tend to be more stable.
But Lippolt acknowledged that sellers with moderately priced homes – in the $300,000-to-$400,000 range – are facing challenges.
“There’s a lot of inventory in that price range right now and I think that those buyers are more skittish about the economy and market conditions,” he said.
In addition, lenders are tightening their standards, which could have an impact on buyers who are searching for more moderately priced housing, according to local Realtors.
Georgia Taft Pye, a Duxbury-based exclusive buyer’s agent who serves the South Shore, said she has noticed how tough it can be for sellers to move their properties. She is working with three clients who have had no problem finding new homes but are having difficulty selling their current properties.
In one case, Pye is working with a couple that owns a condo and is searching for a single-family home in four South Shore communities. Pye said when the buyers listed their Pembroke condo in January there were only 37 condos on the market in the town. Now there are 54.
“They found a house that they want to buy but the owner would not accept a sale-of-home contingency,” she said.
For sellers, a home’s price, condition and location are especially critical in this market because there is plenty of competition, said Pye. “You need all those factors to be aligned for it to be a quick sale,” she said.
Pye also has noticed a buildup in inventory in communities like Duxbury, particularly in the $1 million-plus range. There are 26 single-family homes priced $1 million and higher on sale in Duxbury, and 10 of them had been on the market for more than 300 days, she said.
In some cases, buyers and sellers just can’t agree on price. Sellers are sticking to their asking prices, but buyers aren’t willing to budge on their offers either, Pye said.
“The seller is sure we’re bottoming out and they seek their price. But buyers are so conservative right now, and I don’t blame them. As their buyer’s agent I’m not going to be encouraging them to be anything but conservative,” she said. “I think buyers really need to be conservative. We don’t know for sure that we’ve reached a bottom.”
Winzer, of Local Market Monitor, doesn’t think the housing market has hit bottom. He predicted that the weakening in the local housing market will continue for several years.
In the past, even small shifts in demand have caused prices to either swing up or down in the Boston region, he explained. But unlike other regions that build new housing when demand increases, Boston hasn’t responded to increased demand with a building boom because the region is largely built-out.
“My opinion is that the real estate markets here are fragile,” he said. “Here in Boston, the real estate cycles are much sharper. As soon as demand falls off, we’re much more likely to have longer-term price declines.”
While Winzer said he doesn’t expect a recovery soon, he also doesn’t anticipate that prices will plummet by double-digit percentages because overbuilding hasn’t taken place in Greater Boston.
“That makes the Boston market more volatile, but at the same time insulates us” from big price declines, he said.
In the meantime, local Realtors are watching weather forecasts and hoping for warmer days. The area’s recent blustery and rainy weather has put a damper on the traditionally busy spring season, according to some Realtors.
Susan Renfrew, owner of Renfrew Real Estate in Greenfield, attributed the 7 percent drop in single-family home sales in Franklin County during the first quarter to the harsh weather conditions. She said some transactions have been delayed because the weather has hindered inspections and installations of septic systems.
“The real story here was the weather in the first quarter. Winter didn’t actually arrive until Valentine’s Day and it has refused to let go,” she said. “I think it’s played a huge part.”
