Housing prices put at or near low

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James Corbett, 76, and his wife, Lorraine, 71, put their five-bedroom home in Danvers on the market in March for $539,900. Six months later it is still for sale -- for $40,000 less.

The former manufacturing-plant engineer and former nurse, eager to move into a retirement community, didn't wait long to begin reducing their asking price as the housing market slumped. They dropped the price to $529,900 in April and to $519,900 in May. In September they reduced it to $499,900, and now are considering whether to lower it another $10,000.

In this house market, he said, "You don't know where the bottom is."

Most sellers in Massachusetts can sympathize with the Corbetts. Prices are falling, and sales are slumping. But a recent detailed study of 379 US metropolitan markets by a well-regarded Pennsylvania consulting firm, Moody's Economy.com, says that while home prices are falling nationally, the worst may be over for Boston area homeowners. Prices may not rise any time soon, the study said, but they are probably not going to fall much further.

Boston "is very close to the bottom," said Mark Zandi, chief economist for Moody's Economy.com. "If the price declines aren't over, they're pretty close to over."

Predicting is tricky. The highs and lows of any market, be it stocks or homes, become clear only after the fact. But a number of factors indicate that, despite the fact that the Boston area remains one of the most expensive housing markets in the country, prices may stabilize.

Most important, the state's economy, badly hurt in the recession earlier in the decade, is bouncing back strongly. The state has added 33,000 jobs over the past year and 61,000 since the labor market hit bottom in December 2003. The technology sector has been particularly strong, with payroll employment growing nearly 5 percent in the past year. A growing economy and improving job market translate into more home buyers.

Speculative building and investing -- people building or buying homes and condos to resell or rent, rather than to live in themselves -- occurs here at about half the rate of the nation as a whole. Local zoning regulations slow down the construction process in Massachusetts, and that has the unrelated benefit of cushioning the fall in an economic slowdown because overbuilding has been limited.

Finally, the number of homes on the market, a figure that has been on the rise for five straight years, is beginning to decline. The laws of supply and demand dictate that prices are likely to fall when supply is high, and likely to rise as supplies drop. With fewer homes on the market, sellers don't have to compete as fiercely for buyers.

In September, 5,774 single-family homes were for sale in the Boston area, down from 6,834 a year earlier, said MLS Property Information Network Inc., which tracks housing sales. Houses that sold in September were on the market, on average, for 68 days -- about half as long it took a year ago, MLS said.

Sellers once reluctant to cut prices are relenting. Some who had put their homes on the market to test the waters and attempt to cash in on Boston's record-high prices have taken them off, reducing the surplus and the competition for buyers.

Still, some agents, who have been grappling with a declining market for 18 months, are not ready to declare the worst is over.

"What worries me is we don't have the buyers," said Hingham agent Carol Pagliccia. With entry-level houses costing around $400,000, "that's still a hefty entry level," she said. The economy may be improving, she said, but buyers are waiting to make offers because they "have in their heads" that prices will go down further.

But other agents say that as sellers reduce prices to levels they spurned even a few months ago and interest rates fall, buyers are returning. The 30-year, fixed -rate home loan is currently 6.36 percent, down from 6.8 percent in July, according to Freddie Mac, the federal agency that backs the mortgage market.

"I think we're nearing the bottom based on what I'm seeing in the marketplace," said Steven Levine, an agent in the western suburbs. "In the spring and summer when I was telling people to reduce the price, they were hesitant to do that. Now they're more amenable" and are pricing homes more appropriately.

Economy.com's report isn't entirely rosy. Though Boston-area home prices may not decline much further, they will not be rising anytime soon: Zandi said prices will "go sideways for a couple of years."

Zandi estimated that home prices dropped a total of 2.2 percent in the Boston area in the second and third quarters this year, compared with price declines of 10 percent to 19 percent forecast for many California cities, Naples, Fla., and Las Vegas. The downturns also are expected to last longer in those boom-and-bust cities, he said.

His estimate was based on data that were adjusted to even out seasonal fluctuations, which are pronounced in the Northeast, where winters chill housing-market activity. Zandi's estimate for Boston is more modest than data from the Massachusetts Association of Realtors, which show the state's median sales price declined 6 percent in August. But that figure was not seasonally adjusted, exaggerating price swings. Monthly figures also are more volatile than quarterly data.

Other economists say Zandi's study makes sense. Nicholas Perna, an economic consultant in Ridgefield, Conn., was skeptical of attempts to precisely predict the course of home-price declines, which could continue into 2007. But Perna said the report's central point was valid.

"What he's saying is that the adjustment in Boston is going to be quite mild compared to other cities," he said, agreeing that "the odds of it spanning a couple of years are low."

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

(Correction: Because of a reporting error, a story on Page One yesterday about the Boston area housing market nearing its bottom and its accompanying chart incorrectly described the data about homes for sale in the Boston area for the past six years. The numbers cited -- 5,774 single-family houses for sale in Eastern Massachusetts in September 2006, down from 6,834 a year earlier -- were for houses newly listed in those months, not the total homes for sale.)