Home buyers face limited choices, higher prices.

PHOTO/Matt VOLPINI Worcester Realtor Dave Stead says warmer weather could open up the region's housing market for more transactions.

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As spring nears, homebuyers in Central Massachusetts face few choices and skyrocketing prices.

This “worst of both worlds” scenario emanates from a lack of new construction during the recession and continued wariness by prospective sellers of putting their homes on the market.

Housing supply across Central Massachusetts plummeted 25.1 percent over the past year, from 3,994 single-family homes in January 2013 to 2,990 in January of this year, according to the Massachusetts Association of Realtors (MAR).

“People who are shopping for homes find not very much to look at,” said Tim Warren, CEO of The Warren Group. “They're desperate for more homes to buy.”

This supply crunch has caused the region's median sale price for a single-family home to soar 10.4 percent, from $264,116 in 2012 to $291,500 in 2013, according to The Warren Group, of Boston.

But Realtors disagree over whether Central Massachusetts' inventory woes are seasonal or systemic.

Long-term condition?

Nelson Zide, of ERA Key Realty Services in Framingham, believes this to be a long-term problem.

“If people think the market is going to open up in April or May, they're fooling themselves,” he said.

The plunging home values and widespread job losses that accompanied the 2008 economic downturn have made prospective sellers afraid to upgrade their homes and increase their monthly mortgage payments, Zide said.

Demographics have an impact on today's market, according to Zide.

Millennials (those born after the 1970s) who are having their first children aren't buying bigger homes, Zide said, while the older baby boomers — those born between 1946 and 1964 — who have become empty nesters are holding off on downsizing. Instead, couples young and old, are opting to stay in their existing home and renovate.

“People are very nervous because they saw what happened to the housing market” during the recession, Zide said.

Sellers look for profits

In addition, many homeowners remain unable to sell for a profit. Despite the recent surge, the region's median sale price is still 11.5 percent below the 2007 median of $329,280, according to Warren Group data.

Since people keep most of their equity in their homes, they typically aren't willing to sell unless they can earn a profit, Zide said. At the same time, foreclosure sales have fallen off dramatically as many distressed homeowners are either no longer underwater on their mortgages or more eager to ride things out, said Dave Stead, president of the Worcester Regional Association of Realtors.

But Warren expects that by later this year, home prices in many parts of the state will return to the highs set in 2005.

“We had seven years of decline,” he said,” so we've got room to grow.”

No room for new building

One area with few prospects for improvement, however, is new home construction.

Prices continue to escalate on everything from land and labor to materials and energy, said Guy Webb, executive director of the Home Builders and Remodelers Association of Central Massachusetts. Much of the region's vacant land cannot be built upon due either to open-space regulations or unfriendly terrain, he said, making the remaining parcels quite pricey.

“Land is scarce,” Webb said. “They're not making more of it, and there's less and less that's buildable.”

The lack of developable space is most pronounced in MetroWest, according to Zide.

“There's not enough land in Framingham to build a 30-lot subdivision,” he said.

The dearth of new construction has resulted in a 35.3-percent drop in the region's home inventory over the past year, according to the MAR. The Interstate 495 West area now has just a 3.7-month supply of homes (the amount of time it takes to sell that supply), down from 5.4 months a year earlier.

And even where construction is feasible, building costs are typically so high that it's nearly impossible to build units first-time homebuyers can afford, Webb said. Therefore, the supply of “starter homes” is gradually disappearing.

“A healthy housing sector relies on entry-level homes,” Webb said. “We don't keep pace production-wise, and that's going to have long-term ramifications.”

Warmer weather, warm thoughts

But others chalk up the sluggish inventory to an exceptionally brutal winter and believe things will turn around in the coming weeks or months.

Sellers are waiting until the snow melts to list their properties so prospective buyers can see a property's landscaping, said Stephanie Pandiscio, an agent at Foster-Healey Real Estate in Athol.

Warmer weather will allow homeowners to make their places more presentable by repainting the front door, planting flowers and redoing the mulch in their yards, Stead said. He also expects many empty nesters to throw in the towel after this winter and either downsize or relocate to warmer climates.

With prices climbing, buyers clamoring for new homes and interest rates at 4.5 percent for just a few more months, Warren doesn't see how sellers can continue to stay away.

“I can't think of many reasons there shouldn't be lots of inventory this spring,” he said. “It seems like the ideal situation for somebody who wants to sell their home.”

Others take a more measured approach, forecasting improvement in 2014 but nothing resembling the boom cycle of the mid-2000s.

“In the short-term, there's going to be some pretty good activity,” Webb said, “but nowhere near a normal, healthy market.”