Home sales fall again, but prices stay aloft
There is no bubble
business.bostonherald.com
By Jerry Kronenberg
Wednesday, November 24, 2004
The fat lady may be finally singing an end to the Bay State's long-running housing boom.
The Massachusetts Association of Realtors reported yesterday that the number of single-family homes sold in the state fell in October for the fourth month in a row.
That's the first four-month downturn since a November 2001-February 2002 slump in the wake of the Sept. 11, 2001, terrorist attacks.
``When inventory starts to increase, your market tends to slow down some - and we're starting to see that,'' said Judy Moore, president of the Realtors' group.
The association said 4,200 single-family homes changed hands last month, down 5.4 percent from September and 28.8 percent from a 2004 peak in June. Sales also fell 5.3 percent when measured against October 2003 levels.
At the same time, the number of houses on the market rose to a 6.9 month supply, from 6.3 months in September and 6.2 in October 2003.
The median home's sale price also fell, to $344,950, dropping 0.9 percent from September to hit the lowest level in six months. (However, prices actually rose 12.4 percent when compared with October 2003 levels.)
Economists say the combination of fewer sales, higher inventories and prices that drop month over month but rise year over year all point to a boom that's dying.
``If you look at all of the housing booms in history, they all end with the volume coming down first. Prices react later,'' said Karl Case, a Wellesley College economist who recently wrote the Brookings Institution study ``Is There A Bubble?''
Case said that as housing booms end, buyers make low-ball offers, sellers hold out for more money and few deals get done. Net result: big drops in volume, but only small price declines on those sales that go through.
He and other economists say it would take a major recession, big mortgage-rate hike or other bad news to send prices plunging.
``To burst a bubble, you need something to burst it with,'' said John Bitner, chief economist for Lynn-based Eastern Bank. ``We think the pin would be a surge of mortgage rates, but we just don't see that happening.''
William Wheaton, a Massachusetts Institute of Technology economist, predicts Eastern Massachusetts prices will fall 10 percent to 15 percent in inflation-adjusted terms over the next three to four years.
But the industry sees less cause for alarm.
``There is no bubble,'' said Moore, noting that combined 2004 house and condo sales appear likely to surpass 2003's record.
Indeed, the Realtors' group reported yesterday that October condo sales rose 13.6 percent from year-ago levels, although volume fell 11.3 percent from September.
Median condo prices hit $252,500, up 12.5 percent from October 2003 but down 2.8 percent from a month earlier. |
