Massachusetts Housing Market Slump Affects State Unevenly
The Massachusetts housing market is in a slump across the state, but according to statistics released by the Warren Group, the effects of the softening market are particularly strong in some local communities.
In Salisbury, the median sales price for a one-family home in the first five months of this year dropped by 22 percent from the same period last year to $251,000. In West Newbury, the drop was 32 percent, to $448,500.
But the downturn isn’t uniform. Single-family home prices actually rose slightly in Amesbury, Groveland and Merrimac.
Home sale prices have dropped off in Newburyport, but only by 12.8 percent, significantly less than in some surrounding towns.
“Newburyport tends to be more sheltered from this sort of variation than other towns in the area, just because it’s so attractive,” said Jerry Lischke, a mortgage broker with Stone Ridge Realtors in Newburyport. “There’s also the fact that the city is built out to a point where supply is basically fixed. You have the opposite situation in Salisbury, where they build and build and build. Salisbury real estate is like Florida now, with so much supply the market is whipsawing.”
“The generalized statistics only tell part of the story,” Lischke said. “You have to look at the local conditions and the history behind the numbers.”
As an example, Lischke points to Amesbury, where a glut of development created an overabundance of housing supply in recent years.
“That supply is finally starting to be used up, so now you’re actually seeing housing prices rise in Amesbury while they’re going down in many other places,” he said.
Elizabeth Boussu, a buyer’s real estate agent with Re/Max by the River in Newburyport, said she is also seeing a demographic shift in the housing market, as more baby boomers look to move out of rural and suburban towns and into the downtowns of Newburyport and Amesbury.
“There’s a generational transition that’s happening at the same time as all of the other market changes are happening,” Boussu said.
Terry Egan, the editor in chief at the Warren Group, said the statewide real estate downturn is a long-anticipated correction to an overheated Massachusetts mortgage market.
“One reason some of the towns in northern Essex County are getting hit harder is that they’re higher-end communities,” Egan said. “Where the run-up in prices has been steepest is where we’re now seeing steam being let out of the kettle.”
But while he sees the current softening of the market as essentially a predictable and necessary adjustment, Egan said there are also a couple of exacerbating factors that could prolong the depression in the housing market. One factor is the shake-up in the bad credit home loan market.
“I don’t think the foreclosures themselves are having such a strong impact on the market,” Egan said. “It’s that lenders are tightening their credit standards in reaction to the scandal. That means you have fewer qualified buyers; so you’re going to have fewer sales at the same time that you have more supply on the market.”
Lischke said the increase in local foreclosures shakes buyers’ confidence and drives sale prices down because homeowners are competing with auction prices for foreclosed homes.
Egan said the recent trend of increasing fixed-rate mortgage interest rates could also slow the housing recovery.
“Buyers realize that whatever savings they may realize in a down market can easily be eaten up by financing costs,” he said. “That’s definitely going to make buyers think twice.”
With these factors continuing to exert downward pressure on the real estate market, Egan said he doesn’t expect to see any significant recovery until the beginning of next year at the earliest.
“The question now is whether we’re going to bounce along the bottom for the next few months or if there’s further down to go,” he said.
SOURCE: The Newburyport News