Spring’s arrival hasn’t rejuvenated the sagging housing market.
Single-family home sales in Massachusetts plummeted 19 percent in February and prices fell nearly 9 percent compared to the same month a year ago. The price drop is the steepest monthly decline in 18 years, according to The Warren Group, parent company of Banker & Tradesman.
Condo sales didn’t fare better, dropping 25 percent in February, while prices retreated 6.6 percent.
Some analysts predict that market conditions will continue to deteriorate, as foreclosure activity mounts and more homes are sold at discount prices.
“It’s a simple supply-and-demand situation. We have an oversupply of homes for sale and unfortunately we have dwindling demand, not because interest rates are so high – they’re not – but because buyers are cautious, especially first-time buyers. They don’t want to buy a house and find out a year later that the price is 10 percent to 15 percent lower than they paid,” said John Bitner, chief economist for Eastern Investment Advisors.
There were 2,123 single-family home sales in February, compared to 2,628 a year ago. The median selling price dropped 8.8 percent to $301,000 from $330,000. The monthly decline is the sharpest in Massachusetts since December 1990, when the median price was 11 percent lower than the same month the previous year.
A total of 4,241 homes were sold during the first two months of 2008, 24 percent fewer than a year earlier. The median selling price dropped 6 percent to $315,000 from $335,000 during that time.
Bitner said the declines will continue unless the inventory of for-sale homes is cleared.
But Bitner and other industry watchers project it will be a challenge to move homes because the state’s population has declined or stayed flat in recent years.
“Because of the poor population growth, there is not constant demand for more housing, so a relatively thin slice of the homebuying public can have a large impact on home prices. In Boston, that thin slice is the finance sector, which has many high-paying jobs and a lot of turnover,” said Ingo Winzer, president of Cambridge-based Local Market Monitor, which analyzes 100 real estate markets nationwide.
Strong demand for housing when the financial services sector was growing, coupled with a lack of buildable land, has helped drive up prices in the past, he explained.
“But when demand from the finance sector falls Â… there isn’t much else to support the market, and home prices either fall, as is currently happening, or stagnate, as is likely to be the case for the next few years,” he said.
‘Sitting on the Fence’
The condo sector has struggled significantly so far this year. A total of 1,231 condos sold in February, down from 1,641 a year earlier. The median selling price for condos fell to $256,500 from $274,500.
Year-to-date, condo sales plunged 31 percent to 2,368 compared to 3,423. The year-to-date median price was $260,000, a 5 percent drop from the same months in 2007 when the median was $274,000.
“Whatever the February figures show, I’m pretty sure we are in for a longer spell of weakness. The weakness will be most pronounced in the condo market, because condos are a favorite vehicle for speculative investment,” Winzer said.
Some pockets of the Bay State, particularly in communities closer to Boston and Cambridge, are holding up better, according to Realtors.
Walter Hall, founder of Norwell-based HouseSavvy, said there are some parts of Hingham and Duxbury where values have increased for homes in specific price ranges.
In Duxbury, the median single-family home price jumped 14 percent to $696,607 during the first two months of 2008. But there were only a dozen home sales in those months compared to 23 a year earlier. Propping up the median were the sale of a 3,664-square-foot home for $1.96 million and an 11-room Colonial for nearly $1.5 million.
Hingham has posted only 10 home sales so far this year, including two homes that fetched over $1.1 million last month. That’s helped push up the town’s median home price 52 percent to $692,025 from $455,000 a year earlier.
Hall noted that today’s sellers are motivated. “There’s very few houses that are coming on the market now where the sellers don’t have to sell,” said Hall. “Up until about a year ago we figured that 25 percent to 35 percent of unsold listings were from unmotivated sellers. You’re not getting hardly any of that now.”
Lexington Realtor Judy Moore said the economic environment has made consumers pause.
“We have a lot of people sitting on the fence because they are concerned with what’s happening with the economy,” said Moore, who is a regional vice president for the National Association of Realtors.
She added, “But what we do have is opportunities. Every market has a cycle and every cycle is an opportunity for someone and this is a cycle for first-time buyers, especially because of new conforming loan rates.”
Moore noted that homeowners who are selling properties that appeal to first-time buyers also can benefit. “You’ll get less for the home you’re selling but you’ll be paying less for the home you’re buying,” she said.
