Homeowners in MetroWest, and throughout Massachusetts are beginning to adjust to the “new normal” — an industry buzz word used among real estate professionals to define the current state of the housing market.
Buoyed by historically low interest rates, renewed interest by investors and steady job growth, the number of real estate transactions and home prices in the Bay State remained virtually flat in 2011 compared to 2010, bringing what many experts and industry insiders consider modest stability to the market.
For the state, single-family year-over-year home sales declined just 1.8 percent, according to Multiple Listing Service Property Information Network (MLSPIN) data. Prices declined just .4 percent. The number of transactions involving condominiums declined 6.7 percent, but the sales price actually increased 2.7 percent. Multi-family prices also rose 3.9 percent, although transactions decreased 13.5 percent.
The story is actually a little bit better in MetroWest, though.
An examination of MLSPIN data for the communities of Ashland, Framingham, Holliston, Hopkinton, Natick, Sherborn, Southborough, Sudbury and Westborough showed home transactions for 2011 actually increased 1.3 percent compared to 2010, outpacing the rest of the state. Prices did not suffer a big setback either, and were down just over 1 percent.
It’s hard to get excited about descriptions like “flat” and “stable” when discussing real estate, especially when home values seemed to show no signs of slowing just five years ago. However, flat and stable represent the “new normal”, and it’s absolutely a positive trend.
I say this because stability is the first step toward a meaningful recovery. Stability means that home prices have hit the bottom, and from my perspective, barring an unexpected financial catastrophe, it appears that is the case.
As prices stop declining, more people should be motivated to buy or sell a home. That will open the door for home prices to once again begin to appreciate, although we won’t experience the same dramatic increases that took place in the first half of the 2000s. This appreciation will be much slower, and much more gradual.
That’s good, because steady pricing, coupled with historically low interest rates, will continue to attract first-time home buyers. It will motivate “move up” buyers looking to get the biggest bang for their buck when trading up for a larger home, and it will also encourage investment buyers to stay in the game.
“There are many more investment buyers in the real estate market now than in 2010,” said Annette Norton, broker/owner of Re/Max Best Choice in Framingham. “They see that we’re at the bottom and they realize pricing won’t go any lower, so anyone with cash is buying.”
Anecdotally speaking, Norton says properties up for sale through foreclosures and short sales in MetroWest communities do not last more than a day or two, and that almost all receive multiple offers. MetroWest, like many areas, remains a buyer’s market.
In Natick, where year-over-year home sales were up almost 11 percent in 2011, there is not enough supply to keep pace with demand. That’s resulting in quick sales for appropriately priced properties.
The same holds true for other communities. Southborough experienced an 18 percent jump in year-over-year transactions, and Westborough experienced a 26 percent spike in year-over-year transactions.
The desirable community of Sherborn, where just 42 homes were sold in 2010, watched 59 homes change hands in 2011, for a 40 percent increase. Wayland, Newton, Westwood and Needham are also hot spots for activity.
Many people recognize the current market conditions make this a great time to purchase a new home, a second home or an investment property that will help pay for a child’s college, a daughter’s wedding or retirement in 15 or 20 years.
Another reason I am encouraged by 2011 home sales is that, unlike 2010, there was no artificial stimulus to motivate buyers to make a purchase.
Take a minute to think about that. People purchased virtually the same number of homes in 2011 as in 2010, without the federal government dangling a major tax incentive out there.
That is proof positive that more people are back to work and more people feel confident about the economy. Still, it’s not enough and more needs to be done.
I expect the real estate market to remain in this “new normal” until we see long-term, sustained job growth and an enthusiastic return in consumer confidence. How long will that take? With so many factors from so many different parts of the world, it’s hard to tell. But, while we wait, buyers and sellers from MetroWest, an area anchored by good paying jobs, should feel confident that the real estate market is once again showing signs of stability, and dare I say, growth.
Jay Hummer of Shrewsbury is executive vice president and regional director of Re/Max of New England in Natick.