Federal tax breaks, historically low mortgage rates, and an improving economy sparked a record surge in Massachusetts home sales last month, but with the crucial spring selling season still to come, the question remains: Can it last?
First-time home buyers, rushing to beat a possible Dec. 1 expiration of the $8,000 federal tax credit, helped November single family home sales jump by about 60 percent from a year earlier, according to both the Massachusetts Association of Realtors, a trade organization, and Warren Group, a Boston real estate tracking firm. Prices also stabilized.
The realtors organization reported the state’s median home price rose for the first time in more than two years, to $285,000 from $283,000 in November 2008, while Warren Group, which follows a larger number of transactions, reported a decline of just over 1 percent, to $274,000 from $277,500. Median prices are still down about 20 percent from 2005’s peak of about $350,000.
This plunge in prices has contributed to a sales turnaround heavily supported by the federal government, not only with the tax credit - which was recently extended to April and expanded to include long-term homeowners - but also by the Federal Reserve, which has taken several actions to drive mortgage rates below 5 percent.
With the Fed expected to begin pulling back from its stimulus programs next year, and the tax credits scheduled to expire, ma ny wonder whether the housing market “will have the vitality to withstand the withdrawal of government support,’’ said Nicolas P. Retsinas, the director of Harvard University’s Joint Center for Housing Studies.
“A sustainable housing market has to attract private capital,’’ Retsinas said. “The big test will come in the spring.’’
As 2009 comes to a end, though, the state’s housing market is in far better shape than earlier this year, when year-over-year sales were plunging at double digit rates, as were prices. Sales have risen from a year earlier in each of the past five months. With about 4,000 single family homes selling in the state last month, it was the best November since at least 2005.
While the threat of the federal tax credit expiring likely provided the catalyst, other factors contributed to last month’s surging home sales, said Timothy Warren, the chief executive of Warren Group. Chief among them: an economy on the mend. Job losses have diminished in Massachusetts and the unemployment rate has declined in each of the past two months.
“People are less worried about losing their jobs, and we’ve been down so long, there has to be pent-up demand,’’ Warren said. “Massachusetts’ housing market is vastly improved, and headed for further improvement.’’
Michael LeBlanc, who just bought a three-bedroom ranch in Sherborn, said he and his wife, Jane, had been thinking about buying a home for about two years. While they qualified for the tax credit, it wasn’t the main factor driving their decision. A low mortgage interest rate, 4.875 percent, and a sharp drop in the price, to $450,000 from $529,000, made the home affordable. They also have a 9-month-old daughter.
“I really wanted to be smart about it, and what was important to me is that we bought our house when we were ready,’’ said LeBlanc, 33, who works at EMC Corp. in Hopkinton. “We were waiting for the right opportunity. We feel lucky.’’
As LeBlanc shows, buyers are moving far more deliberately than in the frenzy of the last housing boom. “They are thoughtful, measured, and they do more shopping,’’ said LeBlanc’s realtor, Barbara Shea McDonald of Westwood.
Gary Rogers, the president of the Massachusetts Association of Realtors, described buyers as “optimistic, not exuberant.’’ Rogers said the days of bidding wars that could drive up asking prices by 10 percent are gone. But he said the market is picking up, and he expects healthy activity in the spring.
“Prices have stabilized, and the market is more dependable,’’ he said. “People are going to have a sigh of a relief that it’s OK to make a decision.’’
Meanwhile, buyers continue to whittle away at inventories. In November, the state had a 6 1/2-month supply of homes for sale, about half the supply of a year ago, the realtors group said. November marked the 20th consecutive month of year-over-year declines in inventories.
Ultimately, the goal of government stimulus programs is to spur enough sales to reduce housing inventories, and they seem to be working, said Karl Case, a leading housing economist.
“That’s what you look for, transactions,’’ he said. “You want to chew through inventory and get the market back in balance.’’
By Robert Gavin for Boston Globe December 23, 2009