The Housing Bubble

The Massachusetts realtors have the May numbers out. “Sales of detached single-family homes fell for a second consecutive month in May from the same month a year earlier, declining a modest 2.9 percent to 4,055 homes sold in May 2006. Sales have decreased for seven of the last eight months compared to the same period one year ago.”

“The supply of detached single-family homes on the market rose for a 15th consecutive month in May, climbing 26.9 percent over the past year from 36,259 homes for sale in May 2005 to 46,019 this May. Inventory, as stated in months of supply, also rose steadily from 8.7 months last May to 11.3 months of supply in May 2006.”

“Not surprisingly, with the spring market at it’s peak, listings are up from April as well, when there were 42,667 listings available for sale.”

“The number of condominiums for sale has increased 47.5 percent in the past year, from 15,287 units last May to 22,555 in May 2006. The median price of $286,000 is just 0.7 percent below the record high median selling price of $287,900 set in July 2005.”

“The statewide median selling price for detached homes declined a modest 1.2 percent over the past year to $352,700, from $357,000 in March 2005. Although this marks the fifth consecutive month that the median price has been flat or decreased modestly from the same month one year earlier, there is little evidence to suggest that significant price declines will occur in the Bay State housing market.”

“The more moderate sales pace reflects a more cautious approach to home buying on the part of consumers brought on by rising mortgage rates, rising energy prices, and a sharp increase in inventory levels, which has enabled buyers to take a more relaxed approach to the home search process than in prior months when supply levels were tighter.”

“Speculation about a housing ‘bubble’ in the local market also has prompted some buyers to put off their home search or turn instead to the rental market, and that’s led to some softening in demand.”

The Lowell Sun. “Lowell’s vaunted condo market has slipped a bit, according to Warren Group numbers. Sixty-seven condos were sold in the city in May, down 25 percent from 89 in May 2005 , for the year, 240 condos had been sold through May, as opposed to 348 in 2005. The median price dropped from $209,900 to $195,000 over the year.”

The Cape Cod Times. “Sales of single-family homes and condos in the Bay State declined last month. However, sales slid a little more dramatically on the Cape. Sales of single-family homes were down about 16 percent. Sales of Cape condos sank just over 24 percent, going from 149 in May 2005 to 113 last month. The median condo sale price went from $255,000 in May 2005 to $250,000 last month.”

“Meanwhile, Nantucket sale prices took a hit. The median single-family home sale price was $850,000 last month, down 37.50 percent from $1.36 million in May 2005.”

“Looking ahead, Warren CEO Tim Warren expects the condo and house markets to continue weakening slightly throughout 2006, and likely through 2007 as well. ‘I think things are going to slow down, and people just need to get used to that,’ he said.”

The Boston Globe. “Real estate agents said house price declines in Massachusetts indicate sellers are realizing that years of rapid price appreciation are over, and they are becoming more willing to lower asking prices because there are so many homes on the market.”

“‘They’re listening to us now,’ said (broker) William Wolfe in Wilmington. ‘They’re not saying, ‘Let’s try a higher price.’ We’re telling them there’s a lot of competition out there.’”

“May was the final month of the crucial spring selling season, and real estate specialists predicted it will take months for the housing market to work through the surplus of properties now on the market. ‘We’re going to have large inventories and longer times on the market for another year or maybe two years,’ Warren said. ‘When there are fewer sales, you’re going to see the prices start to drop.’”