Housing Inventory Portends Shaky Second Half
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BEST OFFER: Matteo Gentile, left, president of the Worcester Regional Association of Realtors, and Darlene Sodano, right, vice president of the Massachusetts Association of Realtors' central region, say the housing market in Central Massachusetts is still uncertain.
The tone of housing market analysis has become increasingly cheery as 2010 has matured, but the real estate industry’s optimism may prove hasty and misplaced come July.
In Central Massachusetts, real estate executives are hoping the momentum the market has built under the federal government’s tax credit program, falling prices and low interest rates can be maintained in the second half of the year.
But they admit that what the market does after all the transactions spurred by tax credits close at the end of June is a worrisome unknown, especially if foreclosed properties hit the market in any great numbers.
Perhaps most optimistic and enthusiastic is the National Association of Realtors. When it announced that existing home sales had increased 7.6 percent in April, NAR economist Lawrence Yun declared that the housing price correction was “essentially over,” especially in markets that have seen price gains. One of those lucky markets is Massachusetts, but following the NAR’s statistics down through statistics compiled by the Massachusetts Association of Realtors and to those kept by the MAR’s regional chapters reveals markets in poor shape compared to the state and nation.
Supply And Demand
The median selling price of single-family homes in Massachusetts increased to $295,000 in April from $275,000 a year earlier, a 7.3-percent gain. Also during the month, 3,520 single-family homes were sold, a 43.8-percent increase from the prior year.
So, the housing market has hit bottom, right? And, as Yun put it, “a return to old-fashioned responsible lending and buying will help the housing market avoid disruptive and painful bubble-bust cycles.”
Not really.
In fact, Yun noted that sales increases and price upswings came despite housing inventory levels that were “above normal.” And sales increases were driven not only by relatively low prices and interest rates, but by the $8,000 federal tax credit for homebuyers.
After all the transactions that take advantage of that tax credit close at the end of this month, Massachusetts may be left with housing inventory that is not just above normal, but on the rise and decreasing in price.
The inventory of single-family homes in Massachusetts wasn’t just above normal in April, it increased by 6 percent compared to April 2009 to 30,101 listings on the market, an 8.6-month supply, according to the Massachusetts Association of Realtors. There was a 9-month supply on the market in March, also an increase from the same month a year earlier.
Homes sold in Massachusetts in April had been on the market for an average of 123 days, which means sales, despite recent increases, aren’t keeping up with the number of houses hitting the market by a long shot.
Matteo Gentile, a real estate agent from Auburn and president of the Worcester Regional Association of Realtors, said the southern Worcester region, which stretches from Sturbridge and the Brookfields in the west through the southern half of MetroWest, saw 416 single-family homes sold in April for a median price of $248,300. Those homes had been on the market an average of 140 days.
Those are all steep improvements over April 2009.
The northern Worcester region, which is covered by Darlene Sodano, the MAR’s central region vice president, saw the same type of improvements.
However, the Central Massachusetts region as a whole ended the month with an inventory of 5,130 single-family homes on the market compared to 4,583 a year earlier. That’s an inventory increase of nearly 12 percent and a supply that nearly double the 6 months or less that the residential real estate industry considers normal.
As Gentile put it, “The rock bottom of the market is in the past, but we’re not going to be climbing swiftly.”
And even slow growth depends on some very touchy factors. Both Gentile and Sodano said job growth must continue if the housing market is to improve. It would also be nice if interest rates remained low, home prices continued their upward trend and foreclosures abated.
But that may be too much to ask. And a growing inventory and a lack of clear incentives to buy could spell disaster.
“We were extremely busy through the entire month of April. It has slowed down, but it’s still pretty active,” Gentile said, adding that the number of foreclosures in the pipeline is cause for some concern.
The hardest hit will be cities and towns already struggling with foreclosures, according to Sodano.
“…In Fitchburg, every other house seems like it’s a short sale or a foreclosure. If you’ve got a property, and the rest of the street is foreclosed, yes, it’s going to affect the price,” she said.
And now, after months of federal tax credits reviving an otherwise moribund market, real estate executives are quick to downplay the credits’ effectiveness.
“Did it boost sales? Yes,” said Sodano. “But there were other buyers who said, ‘I’m not going to make a big decision based on $8,000.’ ”
Gentile said, “A lot of people said, ‘We’re not so concerned with getting that tax credit.’ For some people, it meant a lot. They planned to buy this year anyway, and this was a nice incentive. I have other clients that have been searching for quite a while and $8,000 isn’t going to help them make a decision.”
Both Gentile and Sodano said they expect to see encouraging pending sales data for May and June as transactions begun in April close. What happens after that, “I’m curious to see,” Sodano said.
At the end of April, “we were all afraid that interest rates were going to go up as the tax credits expired,” Sodano said. But they haven’t. In fact, they’ve gone down.
“We’re still feeling the momentum,” she said.
Still, even if everything goes well, “We’ve got at least another year of extremely slow growth in Central Mass.,” Gentile said.
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