Mass. home prices, sales fall further

Biggest declines in August are on Cape

Massachusetts home prices and sales continued to decline in August as real estate professionals worry whether the US government's handling of the credit crisis on Wall Street will improve the dismal housing market or make it worse.

The median price statewide for single-family homes last month tumbled 9 percent to $323,000 from $355,000 a year ago - the lowest level in August in seven years, real estate data provider Warren Group said yesterday. Through the first eight months of 2008, prices are down about 9 percent, while the number of sales is down 16.7 percent.

The biggest drops were on Cape Cod and the Islands and in Central Massachusetts. In Barnstable County, prices fell 18.8 percent, to a median $325,000 in August, from $400,000 in 2007.

Condominiums had a more mixed month, with median prices through August down just 1.4 percent statewide. Sales plunged 25 percent.

Homes also are taking longer to sell, said the Massachusetts Association of Realtors, which also released sales data yesterday. Single-family homes remained on the market an average of 130 days in August, compared with 127 days in August 2007, the association said.

And now the real estate market has Wall Street's crisis hanging over it. The Bush administration and Congress are haggling over a $700 billion bailout of the troubled financial sector. The broad outlines of the plan would have the government buy up bad mortgage-related investments from financial firms.

Democrats are pushing to add housing-related measures to the plan, such as getting the government to do more to revise mortgages of delinquent borrowers to amounts they can afford and giving bankruptcy court judges the power to alter or void mortgages.

While the various measures are intended to ease pressure on struggling homeowners and lenders alike, some specialists question whether they will make any meaningful difference given the current market conditions and fears about the economy sinking into a recession.

Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University, said if the crisis causes large-scale job losses, the housing market would be further damaged. But, the proposed government bailout and the takeover of Fannie Mae and Freddie Mac have created some funding stability.

"At this point, the housing market is in such bad shape I don't think even Congress or the administration can pull a rabbit out of a hat and change the momentum," Retsinas said. "I don't think any act of government is going to dramatically reverse the market."

Others said it's just too difficult now to judge where the housing market will go. Wellesley College economics professor Karl "Chip" Case said he has scrapped his latest forecast for a housing recovery in early 2009 because of the uncertainties caused by the Wall Street crisis and the direction of the proposed bailout.

"An enormous question is how far will prices fall before they quit," said Case. "I don't have any confidence in any forecast I've seen. There's so much uncertainty it is hard to be specific because we don't know the answers."

Given how much is up in the air, Warren Group chief executive Timothy Warren Jr. predicted the current crisis will have a chilling effect on prospective buyers.

"Uncertainty has a way of freezing people in their tracks," said Warren. "They would rather do nothing than be wrong."

Jenifer McKim can be reached at jmckim@globe.com.