Massachusetts Home Loan Demand Seen Rebounding as Market Bottoms Out
James Corbett, 76, and his wife, Lorraine, 71, put their five-bedroom home in Danvers, Mass., on the market in March for $539,900.
Six months later it is still for sale — for $40,000 less.
The couple didn’t wait long to begin reducing their price as the market slumped. They dropped the price to $529,900 in April and to $519,900 in May. In September they reduced it to $499,900, and now are considering whether to lower it another $10,000.
Like many in the deflating Boston housing market, they don’t know where the bottom is. Most sellers in the Bay State can certainly sympathize, that’s for sure.
Prices are falling, and sales are slumping. But a recent detailed study of 379 U.S. metropolitan markets says that while home prices are falling nationally, the worst may be over for Boston area homeowners. Prices may not rise any time soon, the study said, but they are probably not going to fall much further.
Predicting is tricky. The highs and lows of any market, be it stocks or real estate, become clear only after the fact. But a number of factors indicate that, despite the fact that the Boston area is one of the most expensive housing markets in the country, prices may stabilize.
Most important, the state’s economy, badly hurt in a recession earlier this decade, is bouncing back strongly. The state has added 33,000 jobs over the past year and 61,000 since the labor market hit bottom in December 2003. A growing economy and improving job market translate into more home buyers.
Speculative building and investing — people building or buying homes and condos to resell or rent to pay the home mortgage, rather than to live in themselves — occurs here at about half the rate of the nation as a whole.
However, a bevy of local zoning regulations slow down construction in much of Massachusetts, and that has the unrelated benefit of cushioning the fall in an economic slowdown because overbuilding has been limited.
Finally, the number of homes on the market, a figure that has been on the rise for five straight years, is beginning to drop. The laws of supply and demand dictate that prices are likely to fall when supply is high, and likely to rise as supplies drop. With fewer homes on the market, sellers don’t have to compete as fiercely for buyers.
Sellers once reluctant to cut prices are (finally) relenting.
Some who had put their homes on the market to test the waters and attempt to cash in on Boston’s record-high prices have taken them off, reducing surplus and competition for buyers.
Some agents, grappling with a declining market for 18 months, are not ready to declare the worst is over. Yet.
But as sellers reduce prices to levels they spurned even a few months ago and interest rates fall, buyers are returning. Conventional 30-year, fixed-rate Massachusetts home loans are currently 6.36 percent, down from 6.8 percent in July, according to Freddie Mac, the federal agency that backs the market.
“I think we’re nearing the bottom based on what I’m seeing in the marketplace,” said Steven Levine, a real estate agent in the western suburbs. “In the spring and summer when I was telling people to reduce the price, they were hesitant to do that. Now they’re more amenable and are pricing homes more appropriately.”