A first-time home buyer's tax credit injected life into the lower end of the market that brokers see as a potential set-up for strong sales during the summer, assuming that pent-up demand stretches higher up on the housing food chain.
First-time home buyers were eligible for an $8,000 federal tax credit for home purchases where a sales contract was inked by April 30.
The end of the popular program led to a drop in Massachusetts' pending home sales for May, an industry group said on Wednesday. But many would-be buyers are still hovering, drawn in by low mortgage rates and seeking bargains.
Last spring was a huge flop. That's not the case now, said Paul Foley, home mortgage consultant with Wells Fargo Home Mortgage in Westborough, Massachusetts.
The Massachusetts Association of Realtors said that single-family homes put under agreement fell 16.4 percent in May from April. The decline was a direct result of buyers hurrying to meet the April 30 deadline, it said.
Kevin Sears, president of MAR and co-owner of Sears Real Estate in Springfield, Massachusetts, said baseline conditions -- low interest rates and more affordable prices -- suggest a positive market going forward.
Even with the homebuyer tax credit expiring at the end of April, members feel prices will continue to move up, he said.
Peak to trough, the median price for an existing single-family home in Massachusetts fell by 28.1 percent in about three years through early 2009. Prices remain well below pre-recession levels.
Housing affordability in the state should rise in the next few years to its highest level since the mid-1990s, said economist Adam Clayton-Matthews of Northeastern University.
STABLE JOB MARKET
Many real estate professionals and economists say the end of the recession in late 2009, an uptick in consumer confidence and a decline in the jobless rate add up to a brighter housing outlook.
Prospective first-time home-buyers Prashant and Sapna Sharma of Quincy, Massachusetts, echoed that sentiment.
The couple said the tax credit, while it lasted, factored less into their decision to buy a house than the improving economy and their desire to start a family at some point.
The stability of the jobs market has improved, said Prashant Sharma, 35, a physics professor at Suffolk University in Boston. We started looking a year ago when everything was bleak, and we were cautious.
Employment growth in Massachusetts is tied closely to the national cycle, but the state's jobless rate peaked at a lower level. In and around Boston, unemployment was 8.3 percent in April, lower than the state as a whole at 9.1 percent.
Absent any national situation that severely dampens consumer confidence, it looks like the greater Boston market continues to be definitely on the upswing, said analysts at HouseSavvy.com, an online real estate research organization based in Norwell, Massachusetts.
SALES VACUUM AHEAD?
The big unknown for real estate is whether the buyers credit created additional demand for housing, or simply brought sales forward artificially, leaving a sales void in its wake.
In that vein, a spate of price cuts was made in May by sellers fearing they had missed the spring selling wave.
But Foley, the mortgage consultant, said pent-up demand for pricier houses will very likely be shaken loose by the recent rush of sales to first-time buyers.
If someone is upgrading to a larger house, the only way to upgrade is to sell the original house, he said. The entire market had gone into stagnation during the recession. The only way to reinvigorate the market was to jump start it.
Real estate consultant Ani Kessisian of Century 21 in Watertown, Massachusetts, showed the Sharmas around the two-bedroom, condominium listed for $355,900.
With no firm bids in sight, prices for each of the building's three units were lowered shortly after the tax credit expired.
Steep house price declines during the recession has created new caution among buyers compared with the go-go days before 2006, she said.
People are taking a lot more time to purchase, and everyone wants a bargain, said Kessisian.
(Reporting by Ros Krasny, editing by Mark Egan and Kenneth Barry)