Sunday, April 03, 2005

The market is moving from red-hot to hot

By Chris Reidy, Globe Staff

As of Thursday, MLS Property Information Network Inc. listed 6,009 single-family homes and condos for sale in Greater Boston, up 19 percent from the same day a year ago. More supply should mean more choices for buyers, but don't tell that to Dmitiriy Peregudov, 30. He's an engineer from Waltham who's shopping for his first home purchase with a budget of $300,000 to $400,000.

''I don't want to keep paying rent," he said. ''But there's not much in my price range."

Peregudov is among buyers checking out the all-important spring real estate market. Last year, the local market enjoyed a spring so robust that it propelled Massachusetts to a record real estate year. But how strong will spring 2005 be? Rates on a 30-year fixed-rate mortgage have nudged over 6 percent for the first time in eight months. And with recent snowy weather keeping many house-hunters housebound, 2005 started slowly, said David Drinkwater, president of Grand Gables Realty Group in Scituate.

''This has been the winter from you-know-what," he said. ''Our spring market has been delayed. The next six weeks will be critical."

Higher rates should moderate the pace of sales. Still, Tom Kunz, chief executive of Century 21 Real Estate LLC, is optimistic because rates still remain low by historical standards.

''It's not going to be a red-hot market anymore," he said. ''Just a hot market."

One reason for a red-hot market was low rates that narrowed the gap between the cost of renting and owning. As rising rates widen that gap, more renters could conclude they can no longer afford that first home purchase. Rising rates can also motivate some consumers to take action out of fear that rates will go higher.

Rates creeping up won't have a big impact, claims Rick Fedele, president of Summit Mortgage in Boston. A quarter-point rise to a rate of 6.125 percent increases a monthly payment on a $200,000 mortgage by $32 to $1,215, he noted. ''That's not enough to take many people out of the market," he said.

Rising rates could also cause prices to fall because many buyers can't afford high rates and high prices at the same time.

Maggie Tomkiewicz, president of the Massachusetts Association of Realtors, doesn't expect housing prices to decline.

''Will prices continue to appreciate?" she said. ''Absolutely."

It's rising house prices that bother Mackie Connell, 34, a Waltham software engineer. According to the Massachusetts Association of Realtors, the Greater Boston median selling price for a single-family home last year was $469,000, up 12.2 percent from 2003. For condos, the median rose 10 percent, to $330,000. ''I was convinced that the market couldn't keep going up," he said. ''So I sat it out for awhile. Now I'm sticking my toe in the water."

Connell and his wife, now renters, are looking for a single-family home for about $400,000.

Prices could fall, according to a recent national survey by PMI Mortgage Insurance Co., which found that Greater Boston was more at risk for a home-price decline than any other big metropolitan area. Within two years, there is 53.3 percent probability of weaker home prices in the metro area that includes Boston, the survey found; nationally, there's a 16.1 percent chance of a decline.

The survey took into account how fast an area's home prices are rising in relation to such factors as increases in personal incomes and the number of jobs created by a local economy. Some economists have said the Boston market is at risk of a housing bubble. A bubble occurs when prices rise so far above fundamental values that they could collapse.

Roxbury resident Christa Weathers, 30, originally started looking at multifamily homes in her neighborhood for her first home, planning to sign up renters to help pay the mortgage.

''Most of the properties were overpriced and not in good condition," said Weathers, an account executive for a health insurance firm and a single mother of two.

So Weathers switched her search to condos. Last Thursday, she and her agent, Gary Dwyer of Buyer Agents of Boston, planned to meet to discuss making an offer on a three-bedroom Roxbury condo listed at $272,900.

Jim Stamatos, 36, and his wife, Josie, a lawyer expecting their second child, want to move from their Boston condo to the suburbs. They offered $775,000 on a four-bedroom Colonial in Milton listed at $795,000, said Stamatos, who works in financial services. Another buyer offered more.

''We said, 'We'll go to asking price,' " Stamatos said. ''But we were told it was too late. I think the market is pretty strong."

The market isn't quite as strong at the high end, noted Dwyer. Paul Reynolds, 68, and his wife, Ann Marie, put their three-bedroom Scituate home on the market last summer, then took it off around Thanksgiving. The home went back up for sale early this year at $925,000. The price recently dropped to $899,000.

Mort Sullivan, 41, and his wife, Sabin, a pediatrician, could have delayed buying a larger house for their young family, but rising mortgage rates accelerated their timetable. ''We want to get more space and stay in Waltham," said Sullivan, who works in data management.

The Sullivans agreed to buy a four-bedroom split-level for around $600,000 and put their three-bedroom Colonial up for sale for $499,900. Their broker, Gary Rogers of RE/MAX First Realty in Waltham, said the home went under agreement last week for ''close to asking price" after nine days on the market.

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