Mass. home prices drop 4% as sales fall

The price of single-family homes in Massachusetts dropped by 4 percent in May as property values reacted to the statewide downturn in sales.

The median price fell to $331,000, from $344,700 in May 2005, according to the monthly housing sales report by Warren Group, a Boston real estate research and publishing firm. House sales declined for a fifth consecutive month, falling 5.1 percent last month, to 5,208 units, compared with 5,488 a year ago, Warren Group said.

Total sales of 19,910 for January through May were 9.3 percent below the same period in 2005.

``When there are fewer sales, you're going to see the prices start to drop," said Warren Group chief executive Timothy Warren Jr. But he added that a 4 percent price slump ``is not dramatic" and predicted declines for the year would remain modest.

Condominium sales also weakened further last month. There were 3,037 condo sales, down from 3,292 during the same period in 2005. The percentage drop -- 7.8 percent -- exceeded the house sales decline, though neither market saw the dramatic double-digit decreases experienced in April. The median condo price continued to rise last month, up 1.8 percent to $285,000.

So far this year, 11,638 condos have been sold, 5.5 percent fewer than during the same period last year.

Massachusetts's figures run counter to the overall US housing market, which is particularly strong in the South. New-home sales in the United States rose 4.6 percent in May, to an annual rate of 1.234 million, the Department of Commerce reported yesterday. Sales increases were between 3 and 6 percent in every region except the Northeast, where sales were off about 8 percent.

Real estate agents said house price declines in Massachusetts indicate sellers are realizing that years of rapid price appreciation are over, and they are becoming more willing to lower asking prices because there are so many homes on the market.

``They're listening to us now," said William Wolfe, the owner of Wilson Wolfe Real Estate in Wilmington. ``They're not saying, `Let's try a higher price.' We're telling them there's a lot of competition out there."

The anemic housing market sparked a doubling last month in foreclosure notices filed by mortgage lenders, to 1,613 filings in the state's Land Court, an indication that more homeowners with adjustable-rate mortgages are having difficulty paying rising monthly payments, according to ForeclosuresMass.com, which tracks the filings.

Many are also accruing little equity or losing what little they may have acquired.

Interest rates on five-year adjustable-rate mortgages have increased more than one-half percentage point this year, to 6.32 percent, according to Freddie Mac, the national mortgage backer.

``The levels we are tracking outdistance our earlier predictions," said Jeremy Shapiro, the president of ForeclosuresMass.com.

In the year ended May 31, there were 13,565 Land Court filings, a 40 percent increase over the 9,688 filed over the same period last year, the firm said. The most foreclosures filed in a year were 17,000 In 1991.

The largest increase in foreclosures was in Barnstable County, Cape Cod, 96 in May 2006, up from 32 in May 2005; Suffolk County, 171, up from 71; and Bristol County, 143, up from 64.

Shapiro predicted ``a continued increase" in foreclosures over the next two years.

May was the final month of the crucial spring selling season, and real estate specialists predicted it will take months for the housing market to work through the surplus of properties now on the market.

``We're going to have large inventories and longer times on the market for another year or maybe two years," Warren said.

But economists said that as long as the national economy remains strong and job growth continues, the housing decline in Massachusetts would not be severe.

``You've seen pretty tremendous home price appreciation so as that cools off you're going to see some fundamental changes," said Bob Walters, chief economist for Quicken Loans in Detroit.

But a strong deterrent to a market crash like the one Massachusetts experienced in 1991 is strength in the US and local economies, which generates jobs and income for houses, he said.

Kimberly Blanton can be reached at blanton@globe.com.