The outlook for Massachusetts' spring housing market darkened, as tumbling January sales drove down prices by 4.4 percent, the biggest monthly drop in more than a year.
Sales of single-family houses plummeted 28.4 percent from a year earlier, to 2,114, which was the slowest monthly pace since Warren Group in Boston began tracking the state's housing market in 1987. The median house price declined to $325,000 from $340,000 in January 2007; it was the fourth consecutive month of lower prices.
The Massachusetts Association of Realtors, which released its data yesterday, reported an even steeper price decline: 5.6 percent.
January sales are typically slow - the data reflect closings on sales agreements reached between sellers and buy ers during December and are an imperfect gauge of housing-market activity because of the holiday season. Nevertheless, economists and real estate analysts said it is clear the state's housing market has weakened further in recent months as sales and price drops have regained their momentum.
A widening credit crunch and fears of recession are scaring off prospective home buyers, prompting predictions by analysts that the spring house market, which begins next month, will be slow.
The spring market "is going to be lousy - worse than last year," said Patrick Newport, an economist for Global Insight, a Lexington consulting firm.
The credit crunch "hasn't eased at all since August - it's getting worse," Newport said. "Prices are in a free fall, housing starts are in a free fall, and sales are still dropping - all three have further to fall."
Existing forecasts of the state's housing market do not predict a rebound in prices until mid-2009, but that could change once new data are included.
The state's condominium sales also plunged in January, by 36.2 percent to 1,137, and the median price edged down 1.23 percent, to $270,000, Warren Group said. (Beginning last month, Warren Group changed the way it reports some data. As a result, it revised all of its historic prices and sales totals to exclude transactions involving foreclosure deeds by lenders and short sales, which has made the median prices higher; previously Warren Group included foreclosures and short sales in the data.)
Home prices here have not dropped as much as prices in once-fast-growing cities in the South and West, according to the Standard & Poor's/Case-Shiller home price index released yesterday. Its index of prices in 20 US metropolitan areas declined 9.1 percent last year. Boston area prices were down 3.4 percent in 2007, compared to 10.8 percent in San Francisco, 17.5 percent in Miami, and 5.6 percent in New York.
Also, the February index of US consumer confidence experienced its largest monthly drop since Hurricane Katrina more than five years ago.
Housing and consumer confidence "are feeding off each other in a vicious circle that is making it difficult to have a positive outlook," said Timothy Warren, Warren Group's chief executive.
"It's going to take time to sort itself and for the foreclosures to lessen and for people to have some confidence to get back into market," he added.
But real estate agents and analysts said the soft market presents the best opportunity in years for first-time home buyers. First-time buyers do not have to sell a house in a sluggish market before they are able to buy.
With the supply of unsold homes rising, buyers have strong leverage in negotiating prices. In January, there were 44,540 residential listings statewide - 4.1 percent more than a year ago, the Massachusetts Association of Realtors said.
Susan Renfrew, the association's president, conceded the housing market won't turn around quickly, but she noted that government actions such as increasing the dollar ceiling on mortgages eligible for purchase by government-sponsored agencies such as
Renfrew, who is an agent in Greenfield, in central Massachusetts, noted buyers have many choices at a time when mortgage interest rates are low. The rate for a 30-year fixed mortgage is currently 6 percent.
"We have pent-up demand by people who've been waiting to get back into the market," she said. "This is a great time to buy."
Kimberly Blanton can be reached at blanton@globe.com.
