Clouds shadow economy
Bay State home sales fall 13% in one year
boston.com
By Thomas Grillo, Globe Correspondent, 3/26/2003
In a dramatic sign that the state's faltering economy has taken a toll on the Bay State housing market, home sales plunged in February by the largest percentage in more than two years, according to data released yesterday by the Massachusetts Association of Realtors.
Sales of single-family homes fell to 2,353 houses last month, down from 2,707 one year earlier, a 13.1 percent decline. Month-to-month, sales fell 18.8 percent from January.
It was the largest monthly drop since July 2000, when home sales fell by 17.2 percent.
''The region's economy is not doing well, and the unemployment rate, while not that bad, is still rising, taking potential buyers out of the market,'' said Karl Case, a Wellesley College economics professor who tracks home sales. ''It's clear Massachusetts is struggling.''
But even as the number of single-family home sales in Massachusetts dipped for the second month in a row, the average price, at $340,166, was 11.1 percent higher than in February 2002, when it was $306,295.
From January of this year to February, however, the average price dropped by 9.8 percent, down from $373,584.
Robust home, auto, and furniture sales have been among the few strengths in an otherwise weak economy, say economists, and analysts have been monitoring the real estate market for any signs of a slump.
Nationally, sales of existing single-family homes reached 5.84 million last month, 1.2 percent above the 5.77 million homes sold in February 2002, according to the National Association of Realtors.
The Northeast, which saw a 5.6 percent decline in home sales last month over one year earlier, was the only region of the country to see a year-over-year drop.
Realtors said the Bay State's unemployment rate, which has drifted up from 5.2 percent last fall to 5.8 percent in January, the most recent data available, contributed to slowing home sales. In addition, relatively high home prices, the coldest and snowiest winter in years, and uncertainty about war in Iraq caused sales to tumble, they said.
Condominium sales also slumped in February, for the first time since August -- to 834 in Massachusetts. That was down 5.2 percent from February 2002's pace of 880 units sold. Despite falling sales, the average price for a condo reached $237,439 last month, up from $228,978 a year earlier, a 3.7 percent rise. The average condo price was down 4.4 percent in February from a month earlier, however, when it stood at $248,342.
Peter Casey, the state realtor association's president, said he does not think February's sales numbers are a harbinger for 2003.
''We're seeing a dramatically different situation from a year ago,'' he said. ''Last year at this time we saw the positive pickup following [the terrorist attacks of] Sept. 11, and that's missing now. In addition, we had the worst winter in years, which stalled the spring market until this week.'' Casey predicted 2003 sales won't exceed last year's near-record levels. But with mortgage interest rates at historically low levels, everything is in place for a strong spring, he said.
Rosalind Levine, a Worcester realtor, said she expects home sales to remain sluggish for the first half of 2003, though.
''I'm not ready to say the bubble has burst, but there are major cautions ahead,'' Levine said.
''Sellers who insist on overpricing their homes will have serious problems selling them, because buyers refuse to get caught overpaying for a home, only to see values decline. For the next three to six months, I expect sales to remain flat or drop slightly until the economy rebounds.''
Last month's sales declines came despite the lowest mortgage interest rates since the mid-1960s. The national average rate for a 30-year fixed-rate mortgage was a record-low 5.84 percent in February, down from 6.89 percent in February 2002, according to Freddie Mac's Primary Mortgage Market Survey.
Frederick Breimyer, chief economist at State Street Corp., noted the Massachusetts housing market in 2002 was one of the best for real estate in a decade. It would be impossible to maintain such a torrid pace, he said. ''Last year was an exceptional one for sales activity and price appreciation and we can't expect to repeat it,'' he said.
This story ran on page D1 of the Boston Globe on 3/26/2003.
© Copyright 2003 Globe Newspaper Company.
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