Foreclosures drag down home sales
Prices in August also slump, but 2d report sees gains
The explosion in home foreclosures and a tightening in mortgage lending dragged down real estate prices in Massachusetts in August, a real estate research and publishing firm reported yesterday.
Warren Group in Boston said median single-family home prices last month fell 4.9 percent, to $314,000, from August 2006 - the 16th consecutive month in which prices have declined. The number of sales in the period fell by 1.5 percent.
But the Massachusetts Association of Realtors reported a starkly different view of the housing market, based on a smaller number of transactions than those recorded by Warren Group. The realtors group said home prices in creased 1.4 percent, to a median of $357,000, from August 2006, while the number of sales rose a robust 6.6 percent.
The realtor group's report is based mostly on sales brokered by real estate agents, while the larger pool of housing transactions tracked by Warren Group includes sales made directly by homeowners and lenders' repossessions from borrowers and sales of foreclosed homes.
"Everywhere the story's the same," said Patrick Newport, US economist for Global Insight, a Waltham economic consulting firm. "You're having more foreclosures, and they're adding to inventory, and they're putting more pressure on prices to drop."
Yet, August is traditionally a lean month for real estate deals. One longtime home shopper, Louis Rivers, reports the market "feels very weak" and is "getting slower and slower." At open houses, he said, "very often I'm the only person there."
Rivers is shopping for a suburban house inside Route 128 with an open floor plan and garage, priced from $550,000 to $800,000. And he expresses no rush to buy now. "I don't feel the prices are going to go up," Rivers said.
Warren Group executives said the decline in their sales volume is attributable to several factors, including a surplus of foreclosed properties hitting the market driving up the number of houses that are selling at discounted prices and putting pressure on other homes selling in local markets.
About one out of every 10 sales last month involved a foreclosure or delinquent homeowner, Warren said. A caveat is that foreclosure "sales" include an undetermined number of transactions in which the lender took possession of a home from the defaulted borrower, and is not a true open-market sale.
Doug Azarian, the president of the Massachusetts Association of Realtors, also said foreclosures are concentrated mostly in lower-priced neighborhoods where borrowers with poor credit obtained subprime mortgages. The impact of foreclosures may be greater there than in suburbs insulated from the crisis.
Outside of the foreclosure problems, the Massachusetts market is "very stable," Azarian said. Currently, there is about an 8-month supply of houses listed for sale, down from 9.6 months last year, he said. A smaller supply of properties for sale tends to support prices.
Azarian believes another phenomenon boosted the number of August sales recorded by real estate brokers: The soft market has made it so difficult for homeowners to sell their houses by themselves that more are turning to agents who "have a better ability to get a home sold than the seller does," he said.
But analysts also said the housing market is just starting to feel the effects of the wider mortgage crisis, which started in the subprime market early this year. Potential buyers are having difficulty getting home loans or they are paying more for some mortgages, including jumbo loans, which experienced about a 1 percentage point interest rate increase.
Timothy Warren, the firm's chief executive, predicted the impact of the mortgage crisis has not been fully felt in the home-buying market. The August sales figures represent deals negotiated in June or July, when the mortgage industry's woes were just beginning.
The housing market is "going to continue in negative numbers for a while longer," he said.
Randy Wilburn, a real estate agent and homebuyer counselor in Boston and Milton, called the mortgage tightening the "X-factor" in the market. Some buyers have pulled out of sales agreements in recent weeks, he said, "because they didn't know what was happening."
The real estate market looks much worse elsewhere in the country. The National Association of Realtors reported yesterday that US sales of existing homes last month declined nearly 13 percent from August 2006 - with the Midwest, South, and West experiencing much worse selling conditions than the Northeast.
Kimberly Blanton can be reached at blanton@globe.com.
