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Waltham, MA - Severe weather over the first three months of the year failed to put a chill in the demand for housing this winter, as attractive mortgage rates, steady job growth and an increase in the supply of homes for sale drew a large number of buyers into the Bay State housing market in the first quarter, according to data issued today by the Massachusetts Association of Realtors® (MAR). Condominium sales were especially strong, setting a new first quarter record, while detached single-family home sales rose to their third highest level on record for a January-March period. The healthy sales pace led to sharp price gains in the detached home and condo markets, the 46th consecutive quarter that prices have risen over year ago levels.

The MAR report shows that in the first quarter sales of detached single-family homes increased 5.8 percent over the comparable period last year, from 8,236 homes sold in the first three months of 2004 to 8,714 from January-March 2005. In the condo market, sales rose even more sharply, climbing 35.4 percent from 3,032 units closed in the 2004 first quarter to a record 4,105 in the same three-month period this year. It's the seventh consecutive quarter that sales of existing single-family homes have risen over the comparable period one year earlier, while condo sales have improved for eight straight quarters.

"The anticipated slowdown in the housing market has yet to materialize," said MAR President Maggie Tomkiewicz, of M. MacDonald real estate in Dartmouth. "Even with the poor weather we experienced this winter, a jump in mortgage rates in March, and ongoing concerns over higher energy costs, we've seen no real decline in buyer demand. If anything, activity has picked up in recent weeks as mortgage rates hit 6 percent and more homes have come on the market."

The fact that the state's economy has added jobs for seven consecutive months also has helped to boost buyers' confidence. "As the unemployment rate has fallen, job security is improved, and that's given many people the confidence to go out and buy big ticket items," observed Tomkiewicz.

Across the state, sales of detached single-family homes rose in all but two regions during the first quarter, with central Massachusetts (Worcester County) and greater Boston observing the most significant year-to-year sales gains at 17.8 percent and 9 percent respectively. Sales also rose a healthy 7-8 percent in southeastern and western Massachusetts (Berkshire, Franklin, Hampden and Hampshire counties), and improved 6.4 percent in the Northeast region over year ago levels. On the South Shore, sales activity was essentially flat in the first quarter, slipping less than 1 percent, but sales fell over the past year by 10.7 percent on Cape Cod (Barnstable County).

In the condo market, sales increased in all seven regions of the state in the first three months of 2005, with double-digit sales growth reported in all regions except southeastern Mass., where sales rose 6.9 percent over year ago levels. The most significant sales gains occurred on the South Shore and in greater Boston, where sales improved 48.1 percent and 41.2 percent respectively. Sales also increased 30 percent or more in western Mass. and Worcester County over year ago levels.

The surge in condo sales is the result of both economic and demographic factors, according to industry observers. "For entry-level buyers the condo market's appeal remains its affordability, but it's the demands of baby-boomers and active seniors that has triggered the current condo craze," stated Tomkiewicz. Condominiums offer the smaller floor plans and maintenance free lifestyle typically desired by those looking to downsize or purchase a vacation home, she explained.

Additionally, with their kids fully grown, many baby-boomers are selling their suburban homes and returning to their roots in the city. "In several cities of the state, the conversion of old mills, schools and churches into condos is being driven in large part by aging boomers looking to return to the communities in which they grew up," Tomkiewicz noted.

During the first quarter, the average rate for a 30-year fixed-rate mortgage was 5.85 percent, up just one-tenth of a point from the same period last year when the average rate was 5.76 percent. However, between the start and end of the quarter, the average for a 30-year fixed-rate mortgage rose one-quarter point, from 5.70 percent in January to 6.04 in March.

"The bump in mortgage rates during March was modest, but it did catch the attention of buyers and should create some urgency, which should help to keep sales strong for the rest of the spring. With rates expected to climb further later in the year, and a lot of new inventory coming on the market in recent weeks, now is a terrific time to buy," said Tomkiewicz.

Notably, those shopping for homes had more to choose from in the first quarter as well. In the first three months of 2005, single-family property listings averaged 38,871, a 6.6 percent increase over the quarterly average of 36,459 detached homes and condos for sale in the first quarter last year. At the current sales pace, this represents 9.1 months of supply, a drop from the 9.7 months of supply available in the 2004 first quarter, but up from 6.3 months of supply in the prior quarter.

Unfortunately for buyers, even though inventory levels are healthier this year, the MAR report found that housing prices continued to rise steadily across the state in the first quarter to new record highs. In the detached single-family home market, the statewide median selling price increased 11.9 percent over the past 12 months, from $310,000 in the first quarter of 2004 to $346,800 in the same three-month period this year. In addition, over the past year, the statewide median selling price for condominiums rose 14.5 percent, from $232,000 in the first quarter last year to $265,650 in the 2005 first quarter.

Regionally, every corner of the state also experienced healthy price increases for detached homes and condos in the first quarter. In the detached single-family home market, median selling prices exceeded the statewide rate of appreciation in western Massachusetts and on Cape Cod, where prices rose over the past year by 15.2 percent and 12.2 respectively. Double-digit price gains also were observed on the South Shore (+11.5%) and in the Northeast region (+10.1%), while prices climbed between 7-9 percent elsewhere. Median selling prices for condominiums increased a dramatic 38.9 percent in southeastern Massachusetts, 19.3 percent on Cape Cod, and nearly 16 percent in Worcester County. Prices also rose a healthy 12-14 percent in the Northeast and South Shore regions, and 8-9 percent in greater Boston and western Mass.

"The current low interest rate environment is likely to prevent prices from falling any time soon," Tomkiewicz predicted. Housing prices generally reflect supply and demand levels, so as long as mortgage rates stay attractive home buying activity should remain strong, thus prices should continue to climb rather than soften, she explained.

After several years, inventory levels are slowly starting to build however, prompting a note of caution from MAR's president. "With more properties coming on the market, sellers need to be realistic in their pricing. If you over estimate the value of your home you may be limiting the pool of buyers who can afford it, making it harder to sell," said Tomkiewicz.

Sales and price data from the MAR report reflect transactions occurring through Realtor®-affiliated multiple listing services in the commonwealth, and account for approximately 80 percent of all real estate sales in Massachusetts.

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