Buyers' market

SHREWSBURY -- With the birth of their twins last June, Michael and Shelby Tutty need to trade up to a bigger house.

But their first home, purchased in 2000, is one of five now for sale in their subdivision, all priced within $10,000 of theirs. Around the corner, Nirnay Patil is selling his and moving his family back to India. One house has been empty since the owners moved closer to Boston, neighbors said. The Kemps, who just accepted an offer on their home, are leaving for a job in Pennsylvania.

``Sad it wasn't mine," Michael Tutty, a health-policy researcher, said about the sale of the Kemps' house.

The Tuttys' neighborhood is a microcosm of a powerful force at work in Massachusetts' real estate market: a record glut of homes for sale, which is likely to cause prices to fall in coming months.

Shrewsbury, a comfortable bedroom community about 40 miles west of Boston with a top-ranked high school and an unhurried lifestyle, had 233 homes for sale as of May 16 -- 86 percent more than a year earlier.

And across Massachusetts, the average number of single-family homes for sale each month during the first quarter of 2006 rose by 16,467, to a record 55,338 homes, the Massachusetts Association of Realtors said.

Homes are piling up on the market because sales have slowed dramatically in the past year. Sales of single-family homes fell to their lowest April level since 1995, according to a monthly housing report issued yesterday by the Warren Group, a Boston firm that collects real estate data.

Single-family home sales fell 16.5 percent last month, to 4,142 statewide, compared to the same month last year.

The condominium market, which until recently had better withstood the housing slowdown, experienced a 15.3 percent decline in sales last month, to 2,420 units.

With more properties on the market, prices have stabilized, after years of substantial appreciation. The median sales price for a single-family home in Massachusetts was unchanged last month, at $335,000, and condos held steady as well, at $272,340.

During the 2000-2005 real estate boom, prices increased 80 percent.

The market began to cool in the second half of 2005, though, as the Federal Reserve's series of interest-rate increases pushed mortgage rates higher, making it more expensive to buy. The average rate for a 30-year fixed mortgage rose to 6.5 percent last month, from 5.6 percent in June, according to Freddie Mac, a federally chartered company that supports the mortgage market.

The result? Homes began staying on the market longer, or not selling at all, as sellers were reluctant to lower their prices to accommodate the higher mortgage costs buyers were facing.

But ``prices are going to decrease," predicted Alan Pasnik, a Warren Group analyst, though he declined to speculate by how much. ``Large inventories depress prices, because buyers have more choices, and you have a larger pool of possibly desperate sellers," he said.

The frenzy that accompanied a home purchase during the boom has ended. Buyers no longer feel pressured to decide quickly, said Bud McManus, owner of a Century 21 agency in Holden. When a house is listed, ``a half-dozen people swoop in to it to see if it's what they like, and if it isn't the right one for them they wait for another one," he said. ``A year ago, those same people would all put an offer on the same house."

Shrewsbury agent Steve Levine, a high-volume broker with Re/Max First Choice, said houses in early 2005 ``routinely" received multiple offers. ``Suddenly, you have houses in those same neighborhoods on the market six months. They're not selling," he said.

His client Dave Covino, 54 and divorced, raised two sons -- one is now a police officer, the other a science teacher -- in his three-bedroom house. He has been trying to sell it for a year. In February, he received two offers, but financing fell through on the one he had accepted; the other buyer had moved on.

He's offering a year's worth of free gasoline to a buyer but is puzzled about why no new offers have been made on his house, a sturdy structure in a cul-de-sac with the open floor plan popular today, though it was built in 1992. Covino has slashed the price by $45,000, to $419,900.

``People are getting quite a product for the money," he said.

As sellers' anxiety rises, house-hunters such as Hannah Welsh take it slowly. A vice president of International Industries Inc., she is looking, with her husband, for a single-family in Shrewsbury, where they own a condo. They are in their late 40s, and want a house with a new roof, a master suite, and space for guests -- a place they could retire in comfortably.

Welsh is noticing that more sellers are dropping their prices. ``We've been able to look in a leisurely way," she said. The glut ``is great for us."

People in the real estate industry attribute the larger inventory to a return to a ``normal market" after years of sizzling demand. But David Iaia, senior principal at Global Insight, a Lexington economics-research firm, said the cause is an unusual convergence of demographic, psychological, and market factors.

``It's a lot of factors working together," Iaia said. Housing supply ``can spiral up faster than you would think."

Slowing sales are one reason: As properties sit unsold, new properties come on the market, expanding the inventory. Last fall's sudden chill in the market prevented many people from selling their homes, so they put them back on in spring.

Even with the slower sales, investors and homeowners are still motivated to try to sell now, with prices still at near-peak levels, to cash out ``while the gettin's still good," Iaia said.

Demographic changes are also at work.

Massachusetts' population declined by an estimated 19,000 between 2003 and 2005, robbing the state of potential home buyers, particularly young professionals. Many first-time buyers who cannot afford the state's high real estate prices are moving to less expensive places like North Carolina or Florida.

And as the oldest baby boomers turn 60, they are starting to retire, with some moving to warmer climates or downsizing to condos. A survey of sellers between August 2004 and July 2005 by the Massachusetts realtor group found that 11 percent of sellers ages 45 to 64 wanted a smaller house, compared with 1 percent of sellers 18 to 44.

``When the kids are done, the soccer games and endless minivans aren't that interesting anymore," said Brian Lambert, who relocated with his wife to a Back Bay apartment to be near their daughters, who are attending college in Boston.

The couple, both in their early 40s, revel in the urban lifestyle they missed out on while raising a family.

If only they could sell their 4,400-square-foot home, ``with all the bells and whistles," near the Massachusetts border in New Hampshire, Lambert said. After it was on the market a month, he reduced the price $20,000, to $719,000. But he has substantial home equity and a good income as a partner in a computer consultancy and won't sell at ``fire-sale prices," he said.

Michael Tutty endlessly sizes up his competition. He learned that one house in his Shrewsbury neighborhood has the same floor plan but lacks the upscale light fixtures, maple cabinets, and Jacuzzi tub he and his wife paid extra for.

He watches prices like a hawk: One seller recently dropped the price of a two-bedroom, like his, by $10,000, to $399,900, dangerously close to his $389,900 asking price.

He got a blunt reminder recently of how fierce the competition is. One prospective buyer stepped into his home for a showing -- having viewed three others in the neighborhood.

``He walked in," Tutty said, ``and said, `This is number four.' "

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