Massachusetts Home Prices Fall 6.1% As Downturn Gathers Speed

For many months I've been defiantly denying that the market here on Martha’s Vineyard was a “bubble”, and that bubble was about to burst. I truly believed that we were somewhat bulletproof due to the nature of our market, that being a vacation and second home market. Now it seems experts everywhere are sheepishly recanting their position on the market forecast; just the other day one such expert had to eat crow on the TODAY show.

I must admit it upsets me to see what is happening, because it doesn’t have to be this way. Our appreciation rate on the Vineyard was not out of line and not the highest in the country, although that may have been true on the North Shore and around the Boston area. A good part of that run-up was due to the lower price range and condo market. I've been hearing for years from clients in Massachusetts who have looked at other prime Massachusetts luxury areas that the Vineyard was still one of the best deals. Have you ever shopped the market in Weston, Marblehead, Wellfleet or Truro? I know as a BUYER’S agent I should be thrilled that the market is now swinging past center to the buyer’s side, but buyers are not taking advantage of what could be an opportune situation. Think about it, the viral frenzy by investors to bail out has doubled the inventory and now we have 625 single family homes and vacant lots on the market, over 660 properties altogether. Sure there are a few ego listings, but most of the glut is due to investors who thought they could make a short term profit and are now thinking that’s no longer possible. If you couple that with the ill-advised marketing strategy that has created a frenzied volley among competing sellers for the lead position in attractive pricing, while hoping not to lose all of their gains, you have what is practically a static market.

The risk for people who are speculating on when the bottom will occur is the same as with those who speculated as to when the top of the market would arrive; they may end up staying at the dance too long. I think the opportunity for buyers is better now than it has ever been, but I still hold to my battle cry --- BOLD OFFERS! Maybe, just maybe, all this inflammatory press and manipulated statistics could work to a buyer’s advantage as sellers are hearing that we could be in for a L-O-N-G haul. Perhaps they are starting to think about how much it will cost them to weather the storm --- taxes, insurance, utilities, mortgage payments and interest, maintenance, etc. The experts are now advising sellers who don’t have to sell their properties to take them off the market, but for those who do need to sell, as I say at the bottom of my home page: ATTENTION SELLERS: A LOW OFFER TODAY, MAY BE A HIGH OFFER IN 60 DAYS.

The following Boston Globe editorial describes what is happening and what is forecasted to happen to the real estate market in Massachusetts. If you take this as a generalization, then you can believe Martha’s Vineyard is part of the scenario. However, is the Vineyard a 1st time home buyer market? No! Is the median home price here $352,000? No! However, the Vineyard is NOT a necessity.

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Massachusetts 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.

``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.

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."