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A foot in the door

The housing downturn has at least one upside: Prices have fallen to the point where it’s once again possible to buy a starter home in Massachusetts

By Jenifer B. McKim
Globe Staff / September 20, 2009

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During the housing boom earlier this decade, Michael Andrini and his fiance, Bethany Prast, saw their dream of owning a home on Cape Cod grow fainter and farther out of reach.

But after four years of falling prices from a housing downturn, owning a home finally became a reality for the two 28-year-olds.

In March, Andrini and Prast scooped up a modern, 1,700-square-foot pondside house on a dirt road in Mashpee for $225,600, about $76,000 less than the value the bank had placed on the home when it foreclosed on the previous owners a year earlier.

“For people like myself it was an opportunity for me to stay on Cape,’’ Andrini said. “It worked out for us.’’

Buying a starter home in many Massachusetts communities is possible again.

“Now we are talking about entry-level homes again. It has reentered the vocabulary,’’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “It is becoming plausible again for young families to find a first home they can afford in an OK place.’’

The housing downturn has pushed home prices down 16 percent since the market peaked in September 2005, according to the S&P Case-Shiller indexes of home prices. And Warren Group, a second data tracker, reported that the statewide median selling price for a single family home was $305,000 in July.

Prices vary widely from town to town. Single-family homes on the Cape the North Shore are selling for as low as $150,000, real estate agents said. Homes that sold in 2005 for $280,000 to $290,000 are now on the market for closer to $220,000, said Matthew Weider, president of Century 21 Shoreland in Hyannis.

“For the first time in a long time, there are people who didn’t think they could have a second home buying on Cape Cod,’’ said Weider.

In Worcester, Framingham, Hyannis, and Brockton the median prices for condominiums are now less than $100,000. And even more affluent areas like Wellesley and Boston’s downtown condo market, where home values largely remained stable over the past four years, have seen values fall.

The declines have been large enough in the Boston area to convince some home shoppers to target single-family homes, rather than condominiums, said agent Gary Dwyer. Moreover, economic forecasts suggesting the housing downturn may have hit bottom are adding to buyers’ willingness to commit to a purchase.

“They are not sure the market is completely at the bottom,’’ said Dwyer, owner of Buyer Agents of Boston, but “they feel comfortable entering the market.’’

Dwyer’s clients Gabe Boucher, 29, and Katie Gunsch,27, also once worried they would have to move out of state to buy a home. But the falling market convinced them to stay in the hunt here. They searched for single-family homes near the ocean and public transportation, eventually settling on Beverly, where prices have fallen about 16 percent since 2005.

Last month, Boucher and Gunsch purchased a four-bedroom, one-and-a-half bath home by a pond for $325,000. “With the downturn in home values, low interest rates, and the first-time home buyers tax credit, we could not pass up this chance to buy,’’ Boucher said. “We were happy to see home values drop.’’

The western suburbs haven’t seen such dramatic price declines. Elaine Bannigan, owner of Pinnacle Residential Properties in Wellesley, said “entry-level’’ in most western suburbs generally refers to homes under $1 million. However, she said, prices have slumped since 2008, and there are good values to be found.

Bannigan’s client Walter Miller, 39, feels fortunate he purchased a four-bedroom home in Wellesley recently for $810,000. He and his wife were looking for a neighborhood that was close to Boston, had good schools, and would hold its value.

“If we had to buy two years ago, there’s no way we could afford this house,’’ Miller said.

Boston’s downtown condo market isn’t offering steep discounts. However, real estate agent Joe Wolvek said that because there is less competition, buyers usually have more time to make a decision. He said a well-priced home still moves quickly - but does not create the “feeding frenzy’’ of the past, when homes often sold for significantly over the asking price.

“The great bargains aren’t happening,’’ said Wolvek, an agent with Gibson Sotheby’s International Realty. “In general, you will find less competition.’’

Marney Cumming, 37, said she and her finance, Tim McCabe,39, were able to bargain down the price of a newly renovated, two-bedroom, 800-square-foot condominium in the South End to $445,000, buying it four days after the brownstone unit came on the market. Cumming said they decided to buy this summer because of the low interest rates and the high cost of renting.

“We are thrilled,’’ she said. “What we found in this market is that the amount we would be paying in rent was exorbitant, compared to a mortgage payment.’’

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