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Mass. home prices fall 6.1% as downturn gathers speed

By Kimberly Blanton, Globe Staff | September 26, 2006

The downturn in the Massachusetts housing market gained momentum in August, with the median price of a single-family home falling 6.1 percent, to $352,000, and the number of sales down 21.6 percent from last year, the Massachusetts Association of Realtors said yesterday.
The condominium market, which had remained steady for most of the year even as the single-family market slipped, also felt the effects of the slowdown. The median condo price fell 3.3 percent in August, to $278,000, and sales fell 18.5 percent.

While sales volume has been in a freefall for months, price declines began showing greater momentum during the summer and are expected to continue into the fall.

``Things are not over in terms of the price declines," said David Iaia, a senior principal for Global Insight, a Lexington economics consulting firm. He said sellers will feel more pressure this fall to drop their prices on homes that have been on the market for more than three months, on average.

Iaia said the state's price declines would continue in 2007 and possibly into 2008, though it is difficult to predict. ``I don't think you'll get a good sense of the impact until next spring," he said.

NECN: Bay State housing takes a downturn

``Now you're at the end of the major selling season, and people who've had their house on the market all summer and haven't sold it are getting concerned, so there are probably more price declines coming this fall," he said.

The real estate market is slowing across the country, although not as dramatically as in Massachusetts. The National Association of Realtors said yesterday that existing homes -- including single-families, condos, and townhouses -- sold at a rate of 6.3 million units in August, 12.6 percent lower than last year. Prices for all types of homes fell 1.7 percent in August, to $225,000.

The interest rate on the conventional 30-year mortgage is 6.4 percent, said Freddie Mac, the federal agency that backs the mortgage market. Higher interest rates have contributed to the cooling real estate market nationwide.

Massachusetts experienced the most price appreciation of any state between 2000 and 2003, and the appreciation continued over the next two years and pushed sales and prices to record levels. The downturn is now in full swing, analysts and agents said.

The August price slide was confirmed in a second report yesterday by the Warren Group, a Boston real estate and publishing firm that compiles market data. Warren Group said the median single-family price declined 8 percent, to $331,000, as sales dropped almost 20 percent. Condo priced fell 5 percent, to $276,000, as sales declined 19.3 percent.

Both the Warren Group and the realtors base their monthly report on actual sales closings in August, but their data sources are different. The realtor association sales and price data are based on house-listings posted in the multiple listing service, an agents' database, while Warren's data is culled from court records on home-sale closings statewide.

David Wluka, president of the Massachusetts Association of Realtors, blamed soaring appreciation during the boom for making it difficult or impossible for many first-time buyers to afford a single-family house. Without them, homeowners are unable to sell when they want to trade up.

High prices are ``creating a clog in the system," he said. ``People trying to buy houses can't buy until they sell houses they own, and unless they price houses they own correctly they're not going to sell."

He said he has witnessed this at this phenomenon with some clients of his firm, Wluka Real Estate Corp. in Sharon. ``I also see buyers holding back and waiting for the bottom, but you can only see the bottom in the rear-view mirror," he said. Buyers ``need to bargain hard," because ``they're in a very powerful position."

Wluka predicted prices could stabilize this fall, if homeowners who aren't serious enough about selling to reduce their prices take their houses off the market.

Since February 2005, single-family sales, when compared with a year earlier, have declined all but one month, according to Warren Group. But price declines, which were delayed until the spring of 2006, have accelerated. In March, for example, the median house price fell 1.52 percent. By June, they were down 9.3 percent, followed by a 6.1 percent drop in July and 8.1 percent in August.

NECN: Bay State housing takes a downturn

Condo prices boomed through 2005 and early this year, fueled by empty-nesters who downsized and by first-time homebuyers who had given up hopes of buying a single-family. While condo sales began declining earlier this year, significant price declines didn't hit until July, when the median condo price fell 4.2 percent compared with July 2005 prices. The August condo price fell 5 percent.

Steven Levine, an agent with Re/Max First Choice Realty in Northborough and Shrewsbury, said he sees a silver lining in the recent interest-rate and house-price declines: Buyers responded in September, the start of the fall selling season.

Levine predicted the market is ``at the bottom" because sellers, after months of resistance, realize that a lower asking price is necessary to spark sales.

``But the buyers are very picky, and they're not buying a house that needs work or has issues," he said. Buyers are ``looking for those cream-puff properties."

Kimberly Blanton can be reached at blanton@globe.com.
http://www.boston.com/realestate/news/articles/2006/09/26/mass_home_prices_fall_61_as_downturn_gathers_speed/
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