Tuesday, October 26, 2004

Signs point to slowdown in housing market

Signs point to slowdown in housing market

The local real estate market is showing signs of slowing down.

There are more homes on the market in Greater Boston than at any time during the last five years, some properties -- especially the more expensive ones -- are taking longer to sell, and price reductions are becoming increasingly common. Meanwhile, sales of single-family homes across the state fell for the second consecutive month, according to yesterday's report from the Massachusetts Association of Realtors.

''Anyone who tells you it hasn't softened is lying," Linda O'Koniewski, the owner of real estate brokerage Re/Max Heritage in Melrose, said. ''A lot of sellers are afraid the market has peaked. They're saying to themselves, 'If I'm thinking of moving in the next few years, why not cash out now?' "

The Massachusetts Association of Realtors yesterday reported that the number of single-family homes sold statewide last month declined 2.7 percent from a year earlier. While the September median sales price of $346,000 was 11.6 percent higher than a year ago, that's the lowest the monthly median has been since May.

As of the end of last month, MLS Property Information Network Inc., which tracks homes for sale, had 7,034 Greater Boston listings for single-family homes and condos -- 862 more properties than a year ago.

Scott Bauman and his wife are feeling the effects. With a baby on the way, they needed to make a move, and in mid-August, they put their antique Ipswich home on the market for $610,000 with Listforless.com, a do-it-yourself website for sellers.

''We thought we'd get lots of offers," said Bauman, 39, who works for a public-relations firm. After five weeks, they received one offer -- for less than asking price. Their home later went under agreement for $590,000 .

''I don't see any other houses selling nearby," he said. ''We definitely feel lucky."

The Baumans' experience is a far cry from those of many sellers in recent years, when bidding wars and offers over asking price were common.

''In prior years, there were three buyers for every house on the market," said Jim Nagle of Coldwell Banker in Lexington. ''Now there are three houses for every buyer.

''When the market was really hot a few years ago, a house might sell in six to eight to 12 days," said David O'Neil, at Century 21 Spindler & O'Neil in North Reading. ''Now they can stay on the market for 90 to 120 days. The market right now is healthy, but it's not robust as it was a few years ago."

Ellen Slaby, 46, and her husband put their Lexington home on the market at $729,999 in February, with plans to move closer to the city. In August, it went under agreement at $615,000. Slaby said a reason it took so long to find a buyer was that there were so many other homes on the market.

But reflecting another side to the market, she added: ''We had friends who sold their house in a week. They were afraid to tell us because they didn't want us to feel bad."

Indeed, segments of the market -- especially homes that are more affordable or are in move-in condition -- remain strong. Statewide condo sales in September rose 16.6 percent to 1,795 units on a year-to-year basis. The median sales price of a condo was $259,900, up 15.5 percent from a year ago.

And not everyone agrees that the boom -- fueled by historically low interest rates amid the region's limited housing supply -- has ended. Some realtors insist that it's normal to see slow sales and price reductions in the fall because New Englanders hate moving in the winter, and that this season has the presidential election and the Red Sox as added distractions.

''Based on the time of year, I've seen no real change in open-house attendance, general inquiries, nor in the number of houses going under agreement," said executive vice president Michael Jewell, who oversees 85 New England offices of Coldwell Banker Residential Brokerage.

Judy Moore, president of the Massachusetts Association of Realtors, said the launch of military action against Iraq hurt the spring 2003 market. Nervous buyers waited until the fall to make a purchase. As a result, comparing last fall's robust sales activity to this fall's doesn't give an accurate picture, she said. While more homes are for sale this year and homes are staying on the market longer, there isn't enough data yet to say that market has entered a new cycle, she said.

But it does feel weaker to some.

Bill Wendel, president of the Real Estate Cafe, a fee-for-service brokerage firm, said his analysis of Arlington and Belmont shows that ''demand and prices are falling."

Paul Frank, owner of Homefinders Buyer Agency in Foxborough, also sees a market losing momentum.

''Last spring was pretty hot; summer was OK; now it's definitely slower," he said.

Walid Saba, president of MAPASS Inc., which arranges appointments for agents showing homes to potential buyers, said the average number of showings per listing was 6.5 last month, versus 4 a year ago.

''More showings mean it takes longer to sell a house," Saba said. ''Last year, if you saw a house you liked, you needed to bid on it immediately. This year, people are looking, but they don't feel they need to make a decision right away."

According to a recent report by economic analysts at Goldman Sachs, the risk of a downturn in the national housing market is rising. The report points to the fact that the inventory of houses on the market has grown and that building of new units continues at a relatively strong pace. At the same time, many buyers have adopted a speculative mindset, believing that prices will keep going up at a fast rate. In a worst-case scenario, the rising supply of houses on the market coupled with overinflated values could lead to a sharp drop in prices.

Saba doesn't believe prices will plummet any time soon, but said, ''We could see prices flattening."

Indeed, demand already appears to be softening.

Marcus Groff, a computer systems administrator, recently cut the price on his Lowell home. Last month, he put the house on the market for $324,900 . After getting no offers, he came down two weeks later to $309,900 .