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Prices Poised to Cool Down

Posted by Scott Van Voorhis June 11, 2014 12:34 PM

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Pending home sales and prices are up again across the state, the Massachusetts Association of Realtors reports.

In fact, the median price of a single-family home in Massachusetts rose to nearly $350,000 in May, a 7.4 percent increase.

So why is your friendly local Realtor so down in the dumps?

OK, we are not talking about a major depression here. But MAR polls members each month on their level of confidence in where the local market and prices are headed over the next several months, and both were down significantly in May.

Confidence in the market fell 19 percent last month while the outlook on prices dropped 7 percent, according to the Realtor Market and Price Confidence Index.

Both forward-looking measures are still well in positive territory - anything over 50 on a scale of 100 is a rising market. But the market indicator fallen to 67.7 while the price index is now down to 76.58.

So what's going on here?

For sure, the long-standing drought in listings is getting on everyone's nerves. Yes, buyers are completely frustrated, but it's no picnic either for real estate agents going up against multiple competing bids on the best deals.

The good news is that we are seeing more homes hit the market - just not enough to keep up with the demand out there.

However, there are some real structural issues at play here as well, I suspect.

The real shortage right now is of starter homes within reach of middle income buyers. The owners of these homes, especially if they bought during the last market run-up in the mid-2000s, aren't rushing to put their homes on the market.

A fairly high percentage of Boston area homes in the lowest pricing tier - 21.4 percent - are still underwater, according to Zillow. That's compared to 4.3 percent in the top tier.

We are talking about an awful lot of homes that are off the table right now.

If you are underwater, you aren't selling right now, no matter how hot the market looks.

This blog is not written or edited by or the Boston Globe.
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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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