Housing sales rise, but prices fall

Mass. data for Jan. suggest the recovery will happen slowly
By Erin Ailworth
Globe Staff / February 23, 2011

The Massachusetts housing market continued its struggle to gain traction as January sales rose solidly from a year earlier, but prices fell from their 2010 levels for the second month in a row.

Massachusetts single-family home sales jumped 5 percent last month, the best January in four years, the Warren Group, a Boston real estate tracking firm, reported yesterday. The median sales price, however, declined nearly 7 percent from a year earlier, to $270,000, following a nearly 6 percent year-over-year decline in December.

It was the fifth consecutive month that the median price remained below $300,000.

The Massachusetts Association of Realtors, which tracks a slightly narrower swatch of the housing market, reported similar results in January. The realtors said single-family home sales rose 13 percent last month from the same time last year, while the median price fell 5.2 percent from year ago to $284,500.

The state’s housing market has improved since hitting bottom in 2009, economists said, but activity remains only slightly above those lows.

Karl Case, an economics professor emeritus at Wellesley College, said the mixed message of rising sales and falling prices shows a robust recovery has yet to materialize.

“It sort of looks to me like it’s bouncing around the bottom, trying to finish this down cycle off,’’ said Case, one of the nation’s leading housing experts and cocreator of the widely followed S&P/Case-Shiller index, which tracks national and metropolitan home prices.

Home values in Greater Boston are down 16.4 percent from their peak in September 2005, and just under 1 percent from a year ago, according to the S&P/Case-Shiller index for December. Average home values in the 20 metro areas tracked by the index have declined about 31 percent since their peak.

In Massachusetts, the rising sales and falling prices could indicate that sellers — many weary of waiting for the market to get better — are starting to give in and take offers from bargain-hunting buyers, economists said.

“This may reflect the fact that people are coming to grips with the new home price realities and are agreeing to sales that they might not have six months ago,’’ said Barry Bluestone, an economist at Northeastern University. “Sellers will hold out for a while, but when they come to the conclusion that home prices will only rise very slowly, it makes sense for them to make deals. And that seems to be what has happened here.’’

Patrick Newport, an economist with the Lexington forecasting firm IHS Global Insight, agreed.

“For buyers, it’s a good time. For sellers, there’s nothing you can do about it,’’ Newport said. “Eventually, they come to the realization that things aren’t going to get better [quickly].’’

Impeding the housing market’s recovery are high unemployment rates, which hold back the income growth that people need to buy, and undermine confidence, said Alan Clayton-Matthews, an economics professor at Northeastern University. Despite improvement in the job market, the state unemployment rate remains above 8 percent, nearly double the rate before the recession.

“That said, [sales] have picked up in the past couple of months,’’ Clayton-Matthews added. “There are so many mixed signals.’’

Laurie Cadigan, president of the Massachusetts Association of Realtors, said she hoped that last month’s gains in sales signal a solid spring housing market is coming. It’s the most important selling season for real estate agents.

“In spite of this miserable January, weather-wise, people are still out in full force because they’ve seen prices come down,’’ Cadigan said. “We’ll have to see how the season goes, but we’re pretty optimistic about it.’’

Erin Ailworth can be reached at eailworth@globe.com.

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