Data suggest local prices may be cooling
The Massachusetts real estate market is running hot and cold.
The state's condominium market continued its blistering, double-digit pace of sales increases last month amid surging demand for luxury, low-maintenance housing. Sales of 2,395 condos in July represented a 12.4 percent jump over July 2004, according to yesterday's monthly report by the Massachusetts Association of Realtors.
Y
et sales of single-family homes slipped 7.4 percent, to 5,328, the third drop in sales from the previous year in the last four months.
''Today's housing stock, both what is getting built and what exists, in many instances is more home than most of today's buyers need or want," said John Dulczewski, spokesman for the Massachusetts Association of Realtors.
Condominiums, he said, appeal to several demographic groups, including first-time buyers who don't need a large house, empty-nesters who want to downsize and don't want to worry about upkeep of their property, and baby boomers looking to purchase a second home or vacation property.
''People just don't want to maintain a big house or have two houses," said Brigitte Senkler, a real estate agent with Coldwell Banker who sells in the pricey western suburbs of Concord, Weston, and Lincoln.
The July decline in sales of single-family homes in Massachusetts mirrored nationwide figures. Sales of existing homes across the country slowed last month as mortgage interest rates, which dipped in early summer, edged up to 5.8 percent. The 2.6 percent decline is the largest since July 2004, the National Association of Realtors reported yesterday. Despite the decline, July 2005 was the third highest on record, and sales continued at a still-strong clip of 7.16 million homes annually.
Analysts noted that the condo and single-family markets are coming off record sales in 2004, and prices continued upward in July. The median single-family price of $375,000 was 7.1 percent higher than July 2004. Condo prices also rose 7.4 percent in July, to $287,900, a record price.
From 2000 to 2003, Massachusetts home values rose 50 percent, the greatest increase in the nation.
But state and national numbers suggest that the era of double-digit increases in home prices in the Boston area may be over.
''The guy who is expecting the house he bought five years ago -- for maybe $300,000 -- who was expecting to sell it for $800,000, may be happy with about $500,000," said Gary Bigg, an economist for
Home sales can fall at the same time that prices rise early in a downturn. Sellers may place high prices on their houses, expecting the market to keep rising. When it doesn't, they resist lowering the price, and instead refuse to take less money for their home. Eventually, sellers reduce their expectations, and sales begin to grow.
Some real estate specialists argue that prices have risen so high that parts of the country are experiencing a speculative ''bubble" as buyers bid prices up beyond their market value. That bubble, if it bursts, would lead to declining home prices either nationwide or in specific markets, such as Florida or Los Angeles. Federal Reserve chairman Alan Greenspan said this year that housing prices in some markets are ''unsustainable," and that there were signs of ''froth" in the market.
''Boston seems to be one of those markets where there are signs of the bubble beginning to not get any bigger," said Nicholas Perna, a former banker and economic consultant in Ridgefield, Conn. But, he added, ''We don't know whether it just slowly deflates or whether it bursts -- we just don't know that."
A recent study by PMI Mortgage Insurance Co. found that Boston is the most likely city to experience a price drop among the nation's 50 largest US metropolitan markets. Two other Boston metropolitan areas also were among the 10 likeliest markets to experience price declines: the Cambridge-Framingham-Newton market and the New Bedford-Fall River-Providence market. Marco Van Akkeren, PMI's economist, said that since job growth in the state has been moderate since 2001, and incomes have not kept pace with housing prices, ''The current housing environment is not supported by long-term economic fundamentals."
But disagreements rage about the numbers. A nationwide study yesterday from the Massachusetts Mortgage Bankers Association found that the housing market's risks are balanced by a strong US economy and a strengthening job market. Rising oil prices, economists said, are a wild card.
''There are risks" nationwide and in Boston, said Doug Duncan, MBA's chief economist. US houses-price growth, he predicted, ''will slow." But, he added, the risks ''are far less dramatic than the hyperbole of recent months."
