Friday, October 7, 2005
"For Sale" signs multiply as real estate market slows
If you're driving around Carlisle these days, it's hard not to notice the number of "For Sale" signs on display. "Supply is great and demand is little," explains Laura Baliestiero of Coldwell Banker Residential Brokerage, noting the usual "after Labor Day spike" has not occurred this year. Other realtors agree; times are tough. "It's quiet," says Phyllis Cohen of Barrett and Co. "There's definitely lower demand." She says some homes are attracting no showings at all. Julie Melanson of William Raveis notes that while June was a strong month, since then, "we are experiencing a dramatic decrease in sales." Marguerite Widell of Carlson GMAC agrees the market has changed, but says, "It's not all gloom and doom. Houses are on for a bit longer, but there are still buyers out there."
Currently, there are 53 homes offered for sale in Carlisle, an 82% increase over last year at this time when there were 29. Even assuming a sales rate equivalent to last year's, the 53 homes represent more than nine months of inventory. And unlike past years, when million-dollar homes predominated, more than half of current listings are for homes under one million.
The glut of offerings has started to force prices down. "I'm seeing daily price changes," says Baliestiero, noting that even the reduced prices don't always attract buyers. She points to a home on Robbins Drive that has been on the market for four months, listing at $549,900 and says, "It's gorgeous. It should have sold in a heartbeat." And it probably would have a year ago, but times are changing.
So what's really happening? Are too many homes being listed as baby boomers start to move on? Are there just fewer buyers? Or are buyers going elsewhere as Carlisle becomes one of the 100 most expensive communities in the country.
Strong sales first half as prices adjust
The news isn't all bad — sales for the first half of the year were strong. Multiple Listing Service (MLS) data supplied by Barrett and Co. reports the following:
Carlisle home sales 1/05 — 9/05 68
Carlisle home sales 1/04 — 9/04 56
Of the 68 sales in the first nine months this year, 33 listed for over $1million. August '05 alone saw 18 closings of agreements generally reached in May or June (note that a sale lags behind acceptance of an offer by one to three months). However, throughout summer and into September, only an additional 11 homes came under agreement in Carlisle, four over $1 million.
To close sales, homeowners have had to take less. After years of getting close to asking price, sometimes more, Carlisle sellers in August garnered only 90% of the original asking price, according to information supplied by Coldwell Banker Residential Brokerage. While some of this difference represented over-optimistic pricing, Jim Marchant of the Carlisle Board of Assessors says, "Things have changed — prices have leveled. This year we had no interim assessment as in the past few years," when rising home prices necessitated mid-year upward adjustments.
More sellers emerge with fear of bubble bursting
Carlisle is not alone in experiencing burgeoning listings. According to Boston.com ("Suburbs in for a cold spell" 9/18/05), single-family inventories across the state are up 51% over last year. The number of Massachusetts listings in September on the MLS Property Information Network, 25,843, was the highest since the network was incorporated in 1998.
Much of the glut is a result of more buyers choosing this moment to sell. "There are two things at play here" according to Karl Case, professor of economics at Wellesley College quoted on Boston.com. "First, the baby boomers, in their efforts to downsize, may be leaving a larger inventory of single-family homes on the market. Second, people may be running scared with all this talk about a coming crash."
Some of the original owners of Deck Houses built in the 1970s in Carlisle are choosing this moment to downsize. When Carlisle home prices were rising, holding on seemed a no-lose investment. With prices flattening and talk of a bubble, retirees and others who can choose their timing are motivated to sell.
An abundance of million dollar listings in Carlisle is an old story, but as more discretionary sellers have entered the market, Carlisle's inventory on the lower end has ballooned. In March of 02, the Mosquito lamented that of 24 homes listed, only three were asking less than $1 million. Currently there are 26 properties listed below $1 million.
While inventory builds, buyers stay put
When inventory is tight and prices are rising, buyers are compelled to move quickly, but with inventory high and prices leveling or dropping, there's no hurry. "Home buyers are realizing that inventory has increased substantially and are now waiting longer to make offers," according to Melanson. "Some buyers are undecided due to the speculation regarding the housing bubble." Add the economic uncertainty brought on by Hurricane Katrina and exploding energy prices, and sellers who can defer a purchase are doing so. Baliestiero points to recent surveys that show consumer confidence dropped significantly between August and September. "With what's going on in the world, people are just grateful for what they have," she says. "They're not looking to change right now."
Currently there are 26 homes listed for over $1 million. This may not be too bad a number, given the 32 sales at this level during the first nine months of '05, not counting the four yet to close. However the 26 do not include 20 to 30 new million-dollar homes on South Street, Cross Street, and throughout town that are likely to be listed in the spring. And one of the factors leading to sales on the high end this year was more realistic pricing. Of the 32 sold, 37% had seen at least one downward price adjustment. Another factor was in-town moves; as prices dropped on the upper end while prices were still rising on the lower, the narrowing price gap convinced more Carlisle families to trade up.
In the last census, Massachusetts was the only state losing population. High home prices are clearly a factor. Both Melanson and Widell independently noted a trend of home sellers moving to North Carolina. These may be transferees, retirees or telecommuters looking to lower the cost of living in a state where a home may cost one-third of the price in Carlisle.
But Cohen sees a balance between transferees in and out, and a slowly reviving job market. Figures from Economy.com's Monthly Household Survey for September '05 shows employment in Middlesex County rising slowly after a set-back last year:
People leaving the area "have different reasons," according to Cohen. "There's no common thread. But it's not an exodus; they're relocating or retiring."
Baliestiero is concerned that Carlisle's high taxes are causing some buyers to prefer other nearby communities. She has seen people without kids in the public school move fro Carlisle to Chelmsford, Billerica, Concord, and other towns. She points to Rangeway Road in Chelmsford where three Carlisle families have relocated. "They can get a bigger house for half the price." But Cohen says she doesn't see much of that. "If a buyer avoids Carlisle, it's because they want to be closer to Route 2 or to have more of a center. Most are quite drawn to it. All things are working for Carlisle." She notes that prices are rising rapidly in towns such as Acton and Bedford, and that in terms of square footage and acreage, "Carlisle looks like a buy." Melanson says that nearby towns are also experiencing a build-up of inventory, with Concord, Westford, and Chelmsford each listing 25 to 30 more homes than at this time last year.
Realtors love the Carlisle School
One area of exposure for Carlisle and towns like it is the way the high end buyer relocating from out of state gathers information — by point and click. Taxes and MCAS scores are easy numbers to find on the internet, and they factor too highly in winnowing choices. An article such as one in the Globe last week rating Carlisle as highest in taxes is very unwelcome to the broker community. On the other hand, this week's announcement that Carlisle's MCAS scores are at the top in several categories was met with a sigh of relief. "That's huge," said Widell with a smile, "especially to the relocation buyer looking for a good school system." She says high taxes are easy to sell-around when the schools are perceived as top-tier. After all, she asks buyers, what would they pay to send their kids to private schools?
But what if next year's MCAS scores aren't as good? Baliestiero says that when a town like Acton scores higher on the MCAS, "buyers can't rationalize the higher taxes." Though she admits it's unfair, "they perceive the schools are better because the MCAS are better." Widell agrees, "If MCAS scores continued (to be less than top tier), it would have an effect. People thinking of coming to an area want solid numbers. Unfortunately, MCAS is a solid fact." Relocators use the scores to decide which communities to look at, but "once they look at Carlisle, I can sell them on it. It's a wonderful community."
Carlisle's attraction still strong
Real estate agents are generally in agreement that though times are slow, Carlisle's fundamentals remain strong. "The quick access to Boston, the fabulous schools, and the small town atmosphere" make Carlisle unique, according to Widell. Though the current market is "not what we're used to," she sees cause for optimism. Interest rates are still low, and she believes buyers now waiting will jump in if they see them start to rise. Marchant says he still sees "plenty of people with money" in his job as assessor, including some paying $10 million or more for houses in Boston. He also points to low rates and the optimism of developers who are going ahead with big Carlisle projects, including one that is the largest in eight years. "Carlisle is very desirable. It's the darling of lots of people."
In an article on Boston.com ("So it's a bubble. So what?" 9/18/05), Economist Karl Case says that, given the rebounding Massachusetts economy, a bust like 1990's, when prices dropped 16%, is unlikely. He advises buyers if they "choose a property that's likely to be attractive to future buyers, prepare to stay for five or more years, and avoid risky mortgages, the market jolts may leave you unscathed."
For sellers, price is all-important. Baliestiero notes that "an appreciating market will catch up" to an over-priced house, but, "in a level or depreciating market, the gap doesn't close." Most realtors seem to believe there will be some price reductions before the inventory backlog is depleted. One who asked not to be named advised sellers to look at prices for recently-sold comparable homes and price 5% below.
Widell says Carlisle homeowners have been spoiled by ever-increasing prices, and "We'll just have to make an adjustment." In the meantime, she advises buyers to get off the sidelines, "There're some wonderful houses they should be looking at."
© 2005 The