State home sales decline in May

Tally hits 18-year low; prices drop 8.6% so far in '08

The spring housing market is shaping up as one of Massachusetts' slowest ever.

Home sales fell steeply in May, completing a three-month run of declines during the prime selling season for real estate. The number of single-family home sales that closed last month, 3,739, was the least for that month since the real estate downturn in 1990, according to Warren Group, the Boston real estate publishing firm that released its monthly housing report yesterday.

Continued sales declines also knocked house prices down further: The January-May price decline - 8.6 percent - was the biggest since Warren Group began collecting the data in 1987.

"The market is still generally pretty terrible," said Alan Pasnik, Warren Group's data analyst.

Things are bad for sellers, that is, who are having to lower prices if they want any chance of making a deal in this slow market. However, with each decline in prices, the market becomes more appealing for prospective buyers who find that properties in more desirable neighborhoods or closer to urban centers or mass transit are becoming more affordable.

But the May sales figures confirmed many analysts' fears that a recovery in the housing market may be years away. A study yesterday by Harvard University's Joint Center for Housing Studies said the number of distressed properties on the US market caused by foreclosures of homes financed by high-risk subprime mortgages has created a downturn that is "the worst in a generation."

"A recovery is not anywhere near in sight," said Eric Belsky, the Joint Center's executive director.

Pasnik said he did not expect to see a firming of prices until at least 2010. "We may be two years away from increasing prices, maybe more. It's hard to predict."

Last month, Warren's data showed prices declined 7.8 percent versus May 2007. The Massachusetts Association of Realtors reported similar results for those transactions that involved brokers: The median single-family price fell 9.2 percent, to $322,500, and sales declined 10.1 percent.

Gary Rogers, an agent with Re/Max First Realty Inc. in Waltham, saw steep declines in prices last month, as owners who want to sell realize how much they have to cut prices.

"People who were unrealistic have either dropped their prices so it sells, or they pull it off the market," Rogers said.

Condominiums have, to some extent, resisted steep price drops. Sales of condos plunged 29.6 percent statewide and 25 percent in the Boston-area in May, but the median price was virtually flat compared with a year ago.

"They'll get their decline, too. It has to happen," Pasnik said.

Meanwhile, communities closer to Boston continued to suffer less than outlying areas. The median price for single-family homes within the Route 495 belt dropped just 3.2 percent over the past year, to $460,000, while condo prices in the metropolitan area were unchanged at $360,000, the Greater Boston Association of Realtors said yesterday.

One explanation may be rising gasoline prices prompting more buyers to look for homes closer to their jobs or near mass transit.

John Dulczewski, executive director of the Greater Boston group, said there are other signs the market is poised to do better. One indicator is the smaller number of properties available for sale, meaning there is less excess inventory hanging over the market. He said it would take just 6.3 months to sell off the existing supply of unsold homes in the metropolitan area, compared with the 10 months of supply weighing down the statewide market.

The small Boston-area inventory "is reflective of the overall economy. The job market is stronger and there's a large pool of buyers . . . who have confidence in the local market," he said.

But other numbers suggest some weakness in the metropolitan market. There were 190 fewer pending sales awaiting final action in May than there were a year ago.

Farther out, in Northeastern Massachusetts the market is tough. Trisha Collins McCarthy, president of the Newburyport Association of Realtors, said it is extremely difficult to close a sale.

There are 419 active listings in the six towns in her association, but only 56 properties were under agreement as of last Friday - about 13 percent of the total. "They're struggling," she said.

McCarthy, who has been an agent since 1991, said it's difficult for her to see a turnaround in the near future.

Some of her clients are trying to sell their homes so they can downsize and cut their housing costs.

"It's busy, but nothing is easy," she said. "You don't know you're at the end until you start going up."

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