In Mass., Experts Still Insisting Market Unlikely to Suffer Prolonged Slump

RISMEDIA, Jan. 25, 2007-(MCT)-The book is closed on the 2006 real-estate market in Massachusetts, and the numbers serve as a final confirmation of an inescapable truth: It was not a good year.

Total sales of single-family homes fell 14.4% from 2005, and the median sale price dropped 5.8% to $325,000, according to numbers released yesterday by the Warren Group. The median price in December was $310,000, down 8.1% from one year earlier.

The annual decline in the median price was the first the state had seen since 1993, when Massachusetts was emerging from a recession. Total sales in 2006 were the lowest since 1995.

"It's pretty significant that we've had a slowdown in the real-estate market after a decade of a great market," said Warren Group CEO Tim Warren Jr.

In December 1996, single-family homes were selling for a median price of $133,000. That's a 133% increase in 10 years, even after last year's declines are factored in. That should provide some perspective on the housing slump, although it's likely cold comfort to anyone who bought into the market at its peak. (That occurred in June 2005, when prices hit $364,000, according to the Warren Group.)

The last housing-market slowdown in Massachusetts lasted from 1989 to 1993, but Warren believes the current decline will reverse itself by the end of 2007.

"I remember that last decline in the market," he said. "It felt like there was much more desperation around things. We were having bank failures, a general slowdown in the economy… there was a lot more speculation in the market back then. This time we have an otherwise pretty good economy and I just don't sense the same kind of lack of public confidence."

Gus Faucher, director of macroeconomics at Moody's Economy.com, agreed that the housing market is not in for a prolonged slump. Like Warren, he expects prices and sales to reach their nadir in mid-2007, then stabilize and move higher in 2008.

Faucher predicted that median prices would bottom out at $348,000. (Economy.com uses numbers from the Massachusetts Association of Realtors, which employs a different pricing method than the Warren Group.)

The market is currently not as out of whack as it was in 1988, when prices had risen more than 15% for five straight years, Faucher said. Sellers have been quicker to react to changing market conditions and have lowered their prices or taken properties off the market.

As unsold inventory levels decline, most experts agree the market should return to equilibrium and make a recovery in 6 to 18 months. Warren believes that process has already begun.

"Just anecdotally, the market has been fairly active at a slow time of year," he said. "There's some interest among buyers and they're not just tire-kickers."

The state's condominium market also took a hit in 2006, although not as hard as the single-family market. Annual sales fell 12.9 percent; median prices dropped only 1.2 percent, to $275,000. Condo sales in 2006 were higher than any year other than 2005. Condo prices had not fallen since 1992.

Real Estate Hot Topics

Profit Center: Real Estate Tips, Training & Events

RISMedia Solutions

RISMedia on the Go

Today's Featured Listing