Newtowners Hold Steady

As Sellers Yield To Buyers Across New England

By John Voket

Homeowners across New England seemed to have it all in the first half of this decade: rapid price increases made homes stellar investments, and if they decided to sell, prospective buyers eagerly lined up to pay top dollar.

But 2006 is shaping up to be the year the region turned into a buyer’s market, with a housing slump hitting New England harder than most of the rest of the country, and predicted to stay that way through the decade’s end.

The downturn cuts across the housing spectrum from Maine to Connecticut, and some economists predict New England’s historically volatile market will recover more slowly than the nation’s as a whole.

While the downturn has sellers going to unusual lengths to unload properties, locally, Newtown real estate professionals say sellers are still holding on the price line.

Local realtors are also coaching sellers, providing home staging, suggesting cosmetic and even structural renovations, as well as offering unique buyer/seller financing options to get more buyers qualified for higher priced homes.

Carol Bussey, ABR/CRS, an agent with Trumbull-based ReMax Right Choice, has been working in the Newtown market for more than a quarter-century. She has seen three major corrections in the market, and still remembers a period in the late-70s when 20 percent interest rates were the norm.

Through it all, however, her philosophy has remained relatively constant.

“When markets correct, a seller more than ever needs an aggressive agent,” she said. This means an agent who won’t shy away from a “tough love” approach with sellers.

“I’m big on making sure sellers’ homes are in great condition, even if it means investing in some cosmetic and even structural renovations,” Ms Bussey said. “I’m also offering full commission sellers a two-hour home staging consultation, providing home warrantees in select cases, and offering competitive buyer-agent commissions.”

At William Pitt Sotheby’s International Realty, manager Robert Morey agrees that when it comes to industry trends and information, “Give the seller the truth up front.”

Based on his reading of industry-related trends, Mr Morey’s believes the truth is not all gloom and doom.

“Stats are already showing a turnaround,” he said. “The structure of our industry’s economy is all there: domestic GNP growth, job growth, excellent interest rates in the six-percent range, competitive pricing and we’re hearing about record bonuses coming out of Wall Street early next year, and that money tends to flow north to markets like Newtown.”

Mr Morey said while prices in Newtown have tended to remain steady or even increase, there is no arguing that the inventory has expanded measurably. “But we’re still seeing activity despite this being a traditionally slow time of year. Buyers and sellers who have to move because of jobs or other reasons have to be serious and realistic based on what is happening overall in the market.”

Promotions And Incentives

Elsewhere in New England, some interesting situations and opportunities are presenting.

In Somerville, just outside of Boston, a condominium developer trying to sell the last of 18 units not only slashed prices, but added a perk: the agent who brings in a buyer gets lunch with a partner in the sales agent’s firm, RCG Properties. Over lunch, the partner will dish out advice on the local real estate market or offer a lesson in winning at poker.

In downtown Boston, the developer of a 14-story condo project held an auction, a sales tool rarely used since the housing downturn of the early 1990s. Bidders at the Folio Boston project’s October auction snapped up 31 luxury units in less than two hours at an average price of $778,000 —about 20 percent below the average asking price before the auction.

The head of the firm that ran the event expects the market slump will lead to more such sales in Boston and elsewhere.

At Century 21 Home Services in Newtown, the company is offering unique programs and promotions to buyers and sellers. Buyers who closed between July and October got a chance to win a big screen HDTV, according to manager Anne Stark.

“We’re also doing a unique seller buydown to get more buyers qualified on local properties,” Ms Stark said. Through a special arrangement with its mortgage vendor, C21 Home Services helps the seller establish an escrow account through which the sellers pay the difference in the current market percentage rate, and a discounted rate for the buyer that steps up over a two-year period.

“Instead of the seller taking a $10,000 cut in their price, the seller establishes a lower qualifying [mortgage] rate, which creates a larger pool of qualified buyers,” she explained. “This has quickly become a unique and creative way to differentiate our sellers from others in their neighborhoods.”

The New England region saw inflation-adjusted home prices rise by 73 percent from 1995 through 2004 compared with 44 percent growth nationwide, according to a report from the Federal Reserve Bank of Boston. Gains in some of the region’s metropolitan areas were sharper, with prices nearly doubling in Boston during the period.

New England is seeing a return to what it experienced at the end of the last century: The region’s home prices grew at a faster rate than the nation’s through most of the 1980s, only to take a steeper dive when boom turned bust in the early 1990s.

“The downturn here is more severe because the upside was so big,” said Karl Case, an economics professor at Wellesley College.

Don’t Double-Dip

Independent Newtown broker Susan Washburn said she shares the wishes of many real estate professionals locally that the market would rebound to a seller’s advantage.

“Statistically, I just don’t see prices coming down fast or far enough,” Ms Washburn said. “When I attend open houses, frankly I’m shocked at some of the asking prices still out there.”

Ms Washburn is telling her clients that today, they cannot expect to get the same type of price as the highest selling similar home in their neighborhood, even if that sale was relatively recent.

“And I’m strongly advising clients not to go forward with new home purchases unless they have airtight contracts in place on their existing properties. Today, there aren’t many people in a position to carry the burden of two homes,” she said.

New England and the Northeast in general are more prone to wide housing swings because development is more dense than elsewhere in the country, with little available land to build, said Celia Chen of Moody’s Economy.com, a private research firm in West Chester, Penn.

The New England Economic Partnership, a regional nonprofit forecast organization, projects the region’s home prices will remain flat through 2010 — in part because of price declines across parts of the region this year — and fall short of the US forecast of 2.1 percent growth per year through the decade’s end.

Among New England’s six states, only Connecticut and Vermont are expected to see housing prices rise at rates above the national average through 2010, with Massachusetts — the region’s most populous state — forecast to see a 1.8 percent decline. Meanwhile, permits to build new homes are expected to decline in all New England states through 2010 as builders reduce their investments in response to the soft market, according to the New England Economic Partnership.

Housing permits are expected to decline an average of 6.2 percent per year. That compares with a dip of three-tenths of a percentage point expected per year for the nation, which is experiencing faster population growth than New England.

Every state in the region except New Hampshire ranked among the nation’s bottom ten states in housing starts from 2000 through 2004, according to the Federal Reserve Bank of Boston.

“We have lousy demographics, and we’ve built a lot, and we have high prices,” Mr Case said. “It’s a period where sellers hold out, and buyers lowball their offers, so you don’t get agreement.”

“You don’t get the price declines you would get in an auction market,” he added. “People hold out, so what goes down is not so much the price as the quantity of sales.”

As buyers and sellers jockey for position across the region, real estate industry officials are reminding customers that most homes will likely yield healthy investment returns — provided the owner holds onto the property for a few years.

“People who buy now will come out just fine,” said Fred Meyer, of University Real Estate in Cambridge. “People who have a little guts and act now can expect prices will eventually get better.”

(The Associated Press reports were used in this story.)