Housing prices keep falling as slump enters its third year
Sellers lowering expectations to close deals
Home sellers in Massachusetts are slashing prices at double-digit rates to close deals, but there is no evidence the lower prices will end a housing slump now entering its third year.
Prices for home sales that closed in March fell nearly 11 percent from March 2007, the largest decline since 1990, and the number of sales reported during that period was down more dramatically - 32 percent - according to the Boston real estate data firm, Warren Group. Condominium prices fell less precipitously, with the statewide median down 1.8 percent.
Some of Boston's more popular suburbs had dramatic price drops for single-family homes in the first quarter of 2008 - prices were down 19 percent in Acton, 23 percent in Westford, and 31 percent in Sudbury - compared with the same three-month period last year.
"It's a self-reinforcing cycle where prices drop and people stay out of the market because prices drop, and that makes prices drop even more," said Patrick Newport, an economist for Global Insight, a Waltham economic consulting firm. "There's potential for prices to drop even more than they did in the 1990s."
That housing slump lasted 3 1/2 years and, by the end, prices had fallen 10.2 percent from the market's previous top.
Real estate agents said the only way sellers in many communities can attract buyers is by cutting their listing prices. But the sharp drop in the number of sales indicates these price cuts have been either too small, or too few, to close many deals.
"The offers don't come together. A buyer and seller might stale mate over $10,000 or $15,000, and you go back to square one. We're seeing a lot of that," said Michael Clancy, an agent in Weymouth.
Among those homes currently for sale, fewer owners have cut their listed prices this year - 41 percent in the greater Boston area - than did last year -55 percent - according to the MLS Property Information Network Inc.
The median price for a single-family home that sold in March was $304,000, down from $340,000 in March 2007, according to Warren Group.
The Massachusetts Association of Realtors had a similarly dour report: Prices for single-family homes fell 8.4 percent and sales declined 32 percent. The association tracks only sales made through real estate agents, while Warren included additional sales, such as those made directly by owners. The March data typically represent deals signed in January and February.
Some markets appeared to be bucking the trend and reported price gains in the first quarter. Prices on average rose 16 percent in Arlington, 18 percent in Hingham, and 22 percent in Newburyport.
But there is so little activity in some communities that the sales prices could be skewed by just a few transactions, both positively or negatively.
In some towns, only the most desperate owners may be striking deals, resulting in larger price drops, while in other communities a few trophy homes could skew prices higher.
In addition to wary buyers, housing specialists said the market is being depressed by tougher standards imposed by lenders that disqualify borrowers with low credit scores or require higher down payments from others.
Another factor is the large number of foreclosed homes hitting the market. Warren Group earlier reported that 1,200 homes were seized in foreclosure in March -significantly higher than a year ago. The number of new petitions to seize homes climbed, indicating foreclosures will continue to weigh down the market.
"That will have a lot of impact on the market," said Timothy Warren Jr., Warren Group's chief executive.
While condominium prices had been holding up better than single-family prices, that market is slow, too.
Sales plunged 35.6 percent in March from a year ago, according to Warren Group.
Condo developers are increasingly turning to auctions to unload units, both in Boston and the suburbs.
Next month, 25 units at the upscale Concord Commons development will be auctioned, while the owners of the Residences at Peabody Crossing will auction 18 condos.
The Peabody project's developer, Town & Country Homes of New England Inc., set minimum prices for various units in the $200,000 range. Some of the units that already sold at Peabody Crossing went for more than twice that, said Sue Hawkes, chief executive of Velocity Marketing, which is handling the auction.
The developer "was hoping there'd be a good spring market like everybody else and realism set in," Hawkes said.
The company was "more comfortable moving on and selling the property he has before there is further potential erosion" in prices, she said.
Thomas Skahen, a partner with Prime Time Communities, a Littleton marketing firm, sees two different markets in Massachusetts. Prices are rising in downtown Boston and some high-priced suburbs, while second- and third-tier neighborhoods struggle with soft sales and foreclosures, he said.
Skahen's firm recently dropped the prices sharply for 36 condos in Holden.
"We're still not getting any activity," he said.
Kimberly Blanton can be reached at blanton@globe.com. 