Massachusetts Housing Market Outlook: It Could Be Worse
Cheer up, Massachusetts.
That’s the message of the Patriot Ledger, regarding the current state of the Bay State’s real estate market. While the state has been stuck in a lengthy bust, one expert says that things are good here compared with most of the country.
Reports from several sources in the past week show the Massachusetts housing market approaching the end of its downturn, while other U.S. states are just now starting to fall apart.
Consider these encouraging signs:
- Sales figures for March and the first quarter show the volume of single-family homes declining during the month, but only by 2.8 percent from March 2006. For January-March, the sales volume actually rose 2.8 percent.
- Compare that with the National Association of Realtors’ figures, which came out a day later and show a national decline in single-family home sales for March of 11.9 percent.
- The Federal Reserve then released its Beige Book, a periodic assessment of regional economies, and it shows real estate activity continued to weaken in many Fed districts - but not Boston.
Despite high Boston home prices, that market was the only metro market in the U.S. to see a decrease in inventory. Essentially, that means the number of unsold homes is piling up… everywhere but here.
The Massachusetts mortgage market was already deep into a funk a year ago, so it would be a bad sign if the sales activity hadn’t picked up, at least a little. So it’s wise to take those statistics with a grain of salt.
In addition, the state still has’t seen the full shakeout from the drying up of the market for bad credit home loans for buyers with shaky credit.
The real multimillion-dollar question: What’s going to happen with home prices? Annual declines in median prices peaked last year at around 6 percent. But prices are still falling, albeit modestly.
Alan Clayton-Matthews, a UMass economist, says it’s natural for buyers to enter the market after a drop in prices, creating more opportunities. He expects the sales volume in the state will rise in the coming months… while “downward pressure” on prices likely will continue for the rest of the year.
The problem is the ratio of home prices to household income: The Bay State still has some of the highest median prices of any location in the country, even after higher salary levels here are taken into consideration.
That means qualifying for a Massachusetts home loan remains extremely challenging for even the state’s middle- and upper-income residents.
This point should serve as a reminder that the state’s affordable housing problem hasn’t gone away, despite recent price declines. The high cost of housing is already threatening the growth of the state’s labor market.
That threat may worsen after housing prices stabilize.
Nevertheless, despite all the panic over subprime home mortgage loans and prices falling through the floor, it’s good to see some encouraging news, even if it’s still relatively quiet on the housing front. For now.
SOURCE: The Patriot Ledger