Demand is up, supply is down, and time is short for hopeful Mass. home buyers seeking tax credit
Karen Daly headed out Sunday to tour a renovated Natick house, confident she would be one of the few home hunters on a cold afternoon during which people were prepping for Super Bowl parties.
But when Daly arrived at the three-bedroom, $449,000 Cape, she found herself among a half-dozen other disappointed prospective buyers who learned that the seller had already accepted an offer. It wasn’t Daly’s first real estate letdown. Last month, she bid more than $20,000 above the asking price for a house in Framingham -- and lost out.
“If you are a buyer, you have to be very decisive, you can’t hesitate,’’ said Daly, 55, who sold her house in two days last summer and has been renting in Newton. “You are looking at very low inventory and very steep competition.’’
After years of waiting on the real estate sidelines, many are ready to buy a home, hoping to take advantage of depressed prices, low interest rates, and a federal tax credit that expires this summer. But many would-be buyers are facing unexpected concerns: not enough homes for sale and high demand for many that are available. Properties below $600,000 are hardest to find, and the most desirable of those, in good condition and reasonably priced, are generating multiple bids within days of going on the market, real estate agents and buyers say.
Unlike other parts of the country, Massachusetts did not overbuild during the housing boom. While sales have been on the increase since July, the number of single-family homes on the market fell to 21,743 in December, marking 21 consecutive months of inventory decline compared with the same month a year before, according to the Massachusetts Association of Realtors. December’s figure was a nine-year low for the month.
“You have a fairly perfect storm, increased demand and decreased supply,’’ said Alex Coon, a Boston manager for Redfin, an online real estate brokerage. “You can find people out there who are getting frustrated.’’
The buying intensity is a shock to people who have been hearing for years about the Massachusetts housing slump. Home values have dropped by about 15.6 percent since 2005, according to the S&P/Case-Shiller Home Prices Indices.
Lily Robles and her husband, Mike Brink, were stunned when their offer on a $469,000 ranch in West Roxbury last week was trumped by a buyer willing to pay more than the asking price on the first day it was shown. “It is kind of crazy that you don’t have even one day to think about it,’’ said Robles. “It was supposed to be a buyer’s market.’’
For years, real estate agents have tried to convince prospective buyers to sign deals rather than wait to see if prices slide even lower. But now that many buyers seem to be gaining confidence in the market, sellers are in short supply. That’s because homeowners who don’t need to move are waiting for the market to turn and drive up prices.
Those biding their time include Andrew Syiek, 50, and his partner, Thomas Cantara, 49, who have considered moving but don’t want to take a loss on their Leominster home. They purchased the Colonial-style house for $447,000 in 2005 and invested more than $100,000 in a massive overhaul, including a new kitchen and two new bathrooms. “We’d be foolish to move now,’’ Syiek said. “People aren’t moving because they’ll take huge hits.’’
Prospective buyers, however, are motivated by the federal tax credit, which was extended and expanded last year to include homeowners as well as first-time buyers. To qualify, buyers must enter into a deal to purchase a home before May 1 and complete all the paperwork before July 1.
Buyers also are spurred by worries that interest rates, which have been hovering at about 5 percent for a 30-year fixed mortgage, will increase this spring after the Federal Reserve halts its purchase of mortgage-backed securities. In addition, there are signs the state’s housing market is on the mend, meaning prices may not go any lower. Home values in the Boston area have increased 5.6 percent since last March, according to Case-Shiller. Sales have increased for six months in a row, compared with the same month a year before, according to Warren Group, a private company that tracks local real estate.
John Neale, a partner with Sprogis and Neale Real Estate in Boston, is concerned that inventory could continue to dwindle. There were 781 condominiums available for sale in downtown Boston in December, an eight-year low, according to the Listing Information Network, a company that tracks the downtown condo market. He said many baby boomers and young families are choosing to stay in the city. That, combined with the low number of construction projects in the pipeline, means “it is only going to get worse,’’ Neale said.
For those shopping at the higher end of the market, selection remains more plentiful. John Prescott, vice president at Century 21 Commonwealth in Wellesley, said more expensive properties -- more than $800,000 in Natick and $1.5 million in Wellesley -- can linger for months. Sellers often have lofty notions about what their homes are worth, he said.
Some sellers are getting a jump-start on the traditional spring selling season by listing their homes in hopes of attracting time-pressed buyers. But there are not enough of them to satisfy real estate agents, who are trying to grow their listings by sending fliers and making phone calls, instead of waiting for business to come to them.
Jan Crosby, a real estate agent with RE/MAX First Realty in Newton, said she has clients who listed their West Roxbury home last week and were thrilled to accept an offer above the $469,000 asking price on the first day it was shown. Crosby attributed the quick deal to a fair list price and lack of competition in the neighborhood. “Inventory that is out there has been kicking around for a while and it is overpriced and unrealistic,’’ she said. “The motivated buyers are out now.’’
But for how long? Kevin Sears, president of the Massachusetts Association of Realtors, said he is warning potential sellers that interest could wane by summer, when the tax credit disappears and the threat of higher mortgage rates starts to loom larger. “We are going to have a flurry of activity in the spring,’’ said Sears. “What is going to happen after that is anybody’s guess.’’
Jenifer B. McKim for Boston Glove February 13, 2010