Massachusetts Realtors Release 3rd Quarter Housing Market Report

Massachusetts Association of Realtors® The Voice for Real Estate™ in Massachusetts


NEWS RELEASE
256 Second Avenue, Waltham, MA. 02451-1139 Telephone (781) 890-3700 Fax (781) 890-4919
FOR RELEASE NOVEMBER 20, 2006 CONTACT: John Dulczewski
AFTER 10 A.M. (781-839-5507)

HOME BUYERS FIND MORE FAVORABLE CONDITIONS AS SALES, PRICES SOFTEN IN THIRD QUARTER

(Waltham, MA.) – After three consecutive summers of steady home sales and price growth, the residential real estate market in Massachusetts experienced a healthy correction in sales and selling prices during the third quarter of 2006, according to a report issued today by the Massachusetts Association of Realtors® (MAR). While demand has eased, the more moderate sales pace and softening in selling prices, combined with today’s higher inventory levels and a steady drop in mortgage rates in recent months, has helped boost affordability levels in the Bay State and usher in one of the strongest buyers markets in years, say MAR officials.
The Realtors® report specifically shows that 11,650 detached single-family homes were sold across Massachusetts in the third quarter of 2006, a decline of 23.4 percent from the comparable quarter last year when 15,211 homes were sold. It’s the sixth consecutive quarter that activity in the single-family home market has declined from the same period a year earlier, and this year’s third quarter sales volume is the lowest for a summer quarter in over a decade, dating back to July-September 1995 when 11,373 homes sold. Sales of condominiums also decreased sharply this past summer, sliding 22.3 percent, from a third quarter record high of 7,124 units sold from July-September 2005 to 5,538 condos sold in the same three-month period this year.
“Although the market has not been nearly as busy as the last few years, housing demand is still healthy. Remember, we are coming off the best year for home sales on record, so business appears to be slower than it actually is,” stated MAR President David Wluka, of Wluka Real Estate in Sharon. In fact, the 2005 third quarter set a record for highest residential sales volume for a single quarter in state history with 22,335 homes and condos sold, so the 17,188 homes and condos sold in third quarter this year seems modest even though it’s the eighth highest sales total ever recorded for a summer quarter in the Bay State.
“The more relaxed sales pace during the third quarter is the result of a waiting game buyers and sellers have been engaged in over the past year,” Wluka said. “Buyers recognize that there’s no shortage of homes for sale, so they’ve been sitting back watching to see if prices will go lower. Meanwhile, many sellers have, until recently, been slow to make price concessions, and they’ve also stopped looking at homes until they are able to reach agreement on the sale of their current home,” he explained.
Regionally, in the third quarter, sales of detached single-family homes fell in all areas of the state from the same period last year, with sales declining 16-20 percent in greater Boston and western Massachusetts; 25 percent in Barnstable and Worcester Counties, the South Shore, and northeastern Massachusetts; and 40 percent in the Greater Fall River-New Bedford area. In the condominium market, sales also declined in every region over the past year, with activity down 12-16 percent on the South Shore and in western Mass.; 20 percent in greater Boston and Worcester County; and roughly 30 percent or more in all other areas.
“Across the state, the markets experiencing the largest corrections are those where home prices climbed too high and too fast,” Wluka noted. “However, as income levels rise and more jobs are added to the local economy, sales should rebound,” he said.
The reality is the sales pace during the boom years from 2003-2005 was unsustainable and unhealthy for the housing
market, according to Realtors®, whereas the current climate reflects more normal activity and favorable conditions for buyers.
-more-

2006 Third Quarter Home Sales Report – add one
“In recent months we’ve seen steady improvement in housing affordability, as many sellers have made significant price reductions and mortgage rates have declined to around 6 ½ percent. Today’s market also features the largest selection of homes for sale in many years, which offers plenty of room for negotiation,” stated Wluka. “For first-time buyers and those previously priced out of the market, now is a good time to be house-hunting before inventory shrinks over interest rates start to climb.”
Indeed, while the number of single-family properties for sale continued to rise during the third quarter over the same three-month period a year ago, data from the MAR report also suggests that the supply of unsold homes and condos may have leveled off between the spring and summer quarters of 2006. Notably, over the past year, the inventory of detached single-family homes and condos on the market has risen steadily by 19 percent, from a monthly average of 53,690 listings (or 7.2 months of supply) in the third quarter of 2005 to 63,945 listings (or 11.2 months of supply) in the same quarter this year. However, the number of residential listings rose less than 1 percent from the second quarter, which saw a monthly average of 63,433 listings.
Additionally, after declining to their lowest level in six months in September, mortgage interest rates remained stable last month, as the average for a 30-year fixed rate mortgage in Massachusetts was unchanged at 6.53 percent.
“Those buyers who attempt to time the market often end up losing some of their purchasing power because rates rise before prices bottom out,” cautioned Wluka. “Now that prices have come down and our economy is growing again, we expect buyers will get more serious. There’s even some evidence of pent-up demand because buyers have been waiting out the market.”
Indicative of this point is the increased time it takes to sell residential property, which has risen by more than a month over the past year. This summer, detached single-family homes were on the market an average of 116 days before selling, compared to just 81 days for homes sold from July-September 2005. Similarly, market time for condominiums increased from an average of 76 days in the third quarter last year to 111 days for units placed under agreement in the same quarter this year.
“With today’s more plentiful supply of homes for sale, properties have to be priced right and well maintained or they are going to be overlooked,” observed Wluka. “Sellers who over-estimate the value of their home risk limiting the pool of buyers who can afford it, and the longer a property sits on the market the more difficult it becomes to sell,” he added.
With sellers continuing to outnumber buyers in the current market, selling prices for single-family homes and condos fell modestly this past summer, the MAR report found. The statewide median selling price for detached single-family homes decreased 4.9 percent, from a record high quarterly median price of $370,000 in the 2005 third quarter to $352,000 in the same quarter this year. It’s the third consecutive quarter that the median selling price has declined on an annualized basis, and the third quarter price drop of approximately 5 percent is the largest year-to-year price decline in over a decade, dating back to the first quarter of 1993 when the statewide selling price of detached homes fell 5.5 percent the over comparable quarter in 1992.
Prices also retreated in the condominium market last quarter, with the statewide median selling price for condos slipping 2.5 percent, from an all-time high median price of $282,000 in the third quarter last year to $275,000 in the third quarter of 2006. Notably, this marks the first year-to-year quarterly decline in condo prices in more than seven years, dating back to the fourth quarter of 1998 when the statewide selling price for condos dipped 0.2 percent from the same quarter a year earlier.
On a regional basis, selling prices in the detached single-family home market were flat over the past year in western Massachusetts, inching up 0.7 percent, but slid 2 percent in greater Boston and on the South Coast, 3-4 percent in Barnstable and Worcester Counties, and 5-6 percent in the Northeast and South Shore regions. Median selling prices for condos also lost ground in most regions, but improved 25 percent on the South Coast and a modest 1-2 percent in Cape Cod and western Mass.
“Prices remain soft in many areas, but are likely to stabilize as supply and demand becomes more balanced,” said Wluka.
Sales and price data from the MAR report reflects transactions occurring through Realtor®-affiliated multiple listing
services in the Commonwealth, and account for approximately 80 percent of all real estate sales in Massachusetts.
-30- 11/20/06




MASSACHUSETTS ASSOCIATION OF REALTORS®



DETACHED SINGLE FAMILY HOME SALES AND SELLING PRICES

REGIONAL COMPARISONS FOR 3RD QUARTER OF 2006 vs 3RD QUARTER OF 2005



SALES


Region 2005 2006 Percentage Change
Cape Cod 1,103 823 - 25.4 %
Central 2,731 2,032 - 25.6 %
Greater Boston 3,484 2,805 - 19.5 %
Northeast 3,009 2,230 - 25.9 %
Southeast 539 321 - 40.4 %
South Shore 2,147 1,593 - 25.8 %
West 2,198 1,846 - 16.0 %

STATEWIDE 15,211 11,650 - 23.4 %




MEDIAN SELLING PRICES



Region 2005 2006 Percentage Change
Cape Cod $404,200 $390,000 - 3.5 %
Central $303,500 $290,000 - 4.4 %
Greater Boston $515,000 $505,000 - 1.9 %
Northeast $408,000 $382,950 - 6.1 %
Southeast $288,000 $280,000 - 2.8 %
South Shore $369,900 $350,000 - 5.4 %
West $215,000 $216,500 + 0.7 %

STATEWIDE $370,000 $352,000 - 4.9 %







Data for this report reflects residential sales reported to Realtor®-affiliated multiple listing services systems in Massachusetts, including the MLS Property Information Network, Inc.; the Multiple Listing Service of the Berkshire County Board of Realtors®; Cape Cod & Islands Multiple Listing Service, Inc.; the North Bristol County Board of Realtors® MLS; and Southeastern Mass. MLS.







MASSACHUSETTS ASSOCIATION OF REALTORS®



CONDOMINIUM SALES AND SELLING PRICES

REGIONAL COMPARISONS FOR 3RD QUARTER OF 2006 vs 3RD QUARTER OF 2005




SALES


Region 2005 2006 Percentage Change
Cape Cod 269 178 - 33.8 %
Central 724 574 - 20.7 %
Greater Boston 3,443 2,743 - 20.3 %
Northeast 1,585 1,118 - 29.5 %
Southeast 97 62 - 36.1 %
South Shore 658 573 - 12.9 %
West 348 290 - 16.7 %

STATEWIDE 7,124 5,538 - 22.3 %




MEDIAN SELLING PRICES


Region 2005 2006 Percentage Change
Cape Cod $268,450 $275,000 + 2.4 %
Central $215,500 $208,750 - 3.1 %
Greater Boston $345,000 $337,000 - 2.3 %
Northeast $242,900 $240,050 - 1.2 %
Southeast $151,250 $189,900 + 25.6 %
South Shore $269,400 $254,900 - 5.4 %
West $156,600 $157,450 + 0.5 %

STATEWIDE $282,000 $275,000 - 2.5 %






Data for this report reflects residential sales reported to Realtor®-affiliated multiple listing services systems in Massachusetts, including the MLS Property Information Network, Inc.; the Multiple Listing Service of the Berkshire County Board of Realtors®; Cape Cod & Islands Multiple Listing Service, Inc.; the North Bristol County Board of Realtors® MLS; and Southeastern Mass. MLS.






Talking Points:

• Despite the more than 20 percent decline in sales activity in the detached single-family home and condominium markets in the third quarter – which represents the largest year-to-year quarterly sales decline since the second quarter of 1995 when single-family sales fell 20.2% and condo sales decreased 13.5% -- housing demand remains historically strong, as the 2006 third quarter residential sales volume of 22,335 detached homes and condos sold ranks as the eighth highest on record for the summer quarter.
Notably, third quarter data reflects market activity as far back as May – when the interest rates were higher and many sellers had not yet made price reductions. Thus, while this report is comprised of data that lags the current market, anecdotal evidence from across much of the state suggests that there has been a measurable increase in buyer activity during the past 4-6 weeks.

• The decline in prices during the third quarter, over the same period last year, is largely a function of supply and demand. Most sellers have come to accept the fact that the market has changed however, and in recent months have adjusted their prices to be more competitive given today’s higher inventory levels.

• The inventory of unsold homes and condos has risen 19 percent over the past year to a monthly average of 63,945 listings in the third quarter, thus providing plenty of choice for buyers entering the housing market. Total listings have declined 3 ½ percent since the second quarter however, an indication that supply and demand may becoming more balanced in the months ahead, which should in turn bring price stability.

• The 5 percent decline in the statewide median home price and 2.5 percent drop in the statewide condo median price during the past year are modest. More significant price declines, on the order of a 20-30% correction as forecasted by some who wrongly predicted a housing “bubble” in the local market last year, are unlikely. In fact, Moody’s economy.com, in its latest housing market report, now believes home prices in metropolitan Boston are now “near bottom” and likely will stabilize by the beginning of 2007.

• Along with today’s more realistic pricing, mortgage interest rates remain very attractive, having dropped to a six month low in September and remained stable at 6.53 percent for a 30-year fixed-rate mortgage in Massachusetts. As a result, housing affordability has improved over the past year, especially for entry-level buyers looking to purchase their first home.

• We’re now enjoying some of the best buyers’ market conditions in years. In fact, with mortgage rates and prices now lower, a wide choice of homes available for sale, and the economy growing again, there’s every reason to believe that the pent-up demand created by buyers who’ve been sitting out the market will lead to improved activity in the months ahead.
Notably, for those buyers who have yet to get serious about purchasing, its important to remember that those who attempt to time the market often end up losing some of their purchasing power because rates rise before prices bottom out.