Massachusetts
Transportation considerations and bargain-seeking in urban areas hit by the sub-prime crisis proved a noticeable trend in 2008, as Bay State buyers leaned toward towns near public transportation and investors made moves on income-producing properties.
REALTORS across the state expect those trends to continue in 2009, with historically low interest rates and realistic pricing ushering in some hopeful signs by the third and fourth quarters.
While home sales dropped by 13 percent in 2008, and sales prices dropped by 9 percent, some communities felt less of a blow.
Communities like Arlington, Woburn, Medford, Wakefield, Reading, Abington, Waltham and Kingston have shown strength in the downturn, due to their proximity to Boston or their location on commuter rail corridors.
“When gas prices spiked up people started buying closer to Boston and in towns with rail service,” said Gary Rogers, Associate at RE/MAX First Realty in Waltham and President of the Massachusetts Association of REALTORS. “The areas between routes 128 and 495 without public transportation declined faster.”
Home sales prices dropped statewide by 13 percent in 2008, led by urban areas with higher concentrations of foreclosure activity. The pressure on prices lured investors seeking bargains on multi-family units, with strong activity in communities like Lawrence, Lowell, Worcester, Brockton and New Bedford. Broker/Owner Terry Sullivan of RE/MAX Advantage Real Estate in Beverly reported that 2008 multi-family sales were up 85 percent in Essex County compared to 2007.
“However, the multi-family market is only 3 percent of the total market,” Sullivan said. “But the fact remains that investors are recognizing good buying opportunities.”
Foreclosure activity has pushed prices lower in traditional vacation areas such as Cape Cod as well. In Hyannis, the average sales price dropped from $607,000 in 1997 to $436,000 in 2008 due to foreclosure pressure. Only waterfront properties on the Cape maintained value in 2008; all other areas showed decline.
Over-55 communities have seen a dramatic slowdown in sales as well as construction. Developers are attempting to change restrictions so they can market the stagnant units to younger buyers.
Rogers says that a disproportionate number of houses on the market now are overpriced, but he expects that a surge of new, better-priced listings will come online after January.
“If interest rates go the way they are forecast to go, we will see a resurgence of activity in the housing market,” he said. “It’s not a cure all, but it will address the number one issue causing market unrest—consumer confidence.
Rhode Island
Foreclosure activity had a dramatic impact on the Rhode Island real estate market in 2008, particularly in urban areas such as Providence, Pawtucket and Cranston. The foreclosure market drove home sale prices in Rhode Island down 16 percent in 2008 compared to 2007, the biggest price drop of the New England states.
However, several communities weathered the 2008 foreclosure and economic storms fairly well, according to Broker/Owner Rob Scaralia of RE/MAX 1st Choice in Cranston.
“There are certain communities that went unscathed by the short sale and foreclosure activity that drove home prices down in other parts of the state,” said Scaralia. “Exeter, Charlestown, Narragansett, Barrington, Warren and the east side of Providence seemed fairly immune to the price pressures.”
In some of those communities the average sales price rose in 2008, Scaralia added.
Overall, 1,697 fewer houses changed hands in Rhode Island in 2008 than in 2007, a 15 percent decrease. On a bright note, home sales dropped less in Rhode Island than in any other New England state in 2008 except Massachusetts.
The big dip in sales prices, however, is directly connected to the high level of foreclosure activity in the Ocean State. Through the second quarter of 2008, about 1.2 percent of Rhode Island homes entered foreclosure, compared to the national average of 1.1 percent. About 27 percent of 2008 home sales in Rhode Island were attributable to short sales or foreclosures.
But there may be a silver lining in these numbers, according to Scaralia.
“These sales are removing a good portion of inventory excess from the market, and the sooner we do that the sooner we’ll come back to a healthier market,” Scaralia said.
First-time homebuyers were active at about the same level in 2008 as in 2007, Scaralia said, and indications are strong that they’ll become more active in 2009. Historically-low interest rates and an abundant supply of bargains, along with an expected ease in credit markets amid the federal bailout plan, will motivate first-time buyers. The only reservations some buyers may have is that the value of their new home will decline after they purchase. These concerns may keep some buyers on the fence as they wait for prices to fall further. But interest rates and tax credits will continue to pull buyers into the market.
“It’s all about affordability now. Buyers need to get in and they need to be able to stay in. The big outcry last year was that people couldn’t actually afford the homes they just purchased. We’re seeing that change now,” Scaralia said.
Another bright spot: Pending sales. They’re up compared to this period last year, Scaralia said.
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