Long-term strength in Massachusett's real estate market began to buckle last year under the weight of a virulent economic slow down that's been tough even for states with the economic vitality of the Bay State.

That could give Massachusett's buyers a respite from 20 years of the fastest rising home prices in the nation.

Sales of detached single-family homes reached only 44,514 in 2001 down 3.9 percent from 46,302 units in 2000. Condo sales of 13,151 also reflected a decline, albeit small, 1.1 percent from 13,300 units sold in 2000, according to the Waltham MA-based Massachusetts Association of Realtors (MAR).

Still, the statewide average selling price for detached single-family homes rose 8.3 percent from $285,154 in 2000 to $308,895 last year. That is, however, the smallest annual increase in selling prices for detached homes since 1997 when the average price rose just 3.8 percent, MAR reported.

As was the case in much of the nation, condos were hotter, with the statewide average selling price climbing 17.7 percent, from $178,226 in 2000 to $209,718 in 2001.

"Consumers had a lot to contend with this past year, from concerns over job security and the anxiety caused by the September terrorists' attacks, to the frustrations inherent in a market that offers limited choices, especially for starter homes," said MAR president David S. Drinkwater.

Massachusetts has seen more home price appreciation than any other state since 1980 according to the Office of Federal Housing Enterprise Oversight, including a 3.38 percent quarterly jump from the second to third quarter last year, a 12.13 percent annual increase in the third quarter last year, a 64.86 percent increase during the past five years and more than 397 percent since 1980.

During the third quarter of 2001, four Massachusett cities were among the top 20 Metropolitan Statistical Areas (MSAs) with the fastest appreciating home prices, according to OFHEO.

"Cape Cod home sales fell in 2001, while home prices continued to rise. My office averaged 93 percent of the listing price. As compared to 2000, for transactions between $25,000 and $1 million, the volume of real estate sales on Cape Cod was down 14.5 percent," Bell One Real Estate agent Caron Bates reported to RealtyTimes.com's Cape Cod Market Conditions Report.

"However, it was still the third busiest year on record for real estate. Due to a lack of affordable housing, first time home buyers are faced with list prices of at least $179,000 or more in all Cape towns. Between November 2001 and February 16, 2002, the average sold price for a single-family house was $317,000 with 89 days on the market. Condos were $170,000 with 83 days on the market," Bates also reported.

According to the Corporation for Enterprise Development (CFED, a Washington, D.C.-based, private, nonprofit, nonpartisan economic development organization), Massachusetts' economic report card continues to generate "As", revealing the state as a bastion of economic strength, due largely to economic diversity including high-paying large and small, new and old technology firms and related strength in trade, manufacturing and financial industries.

However, as Bates indicated for the Cape Cod area, the report card also reveals a state with problems in housing affordability, problems with controlling sprawl, and problems keeping energy costs down.

The state's technology and finance-heavy economy made it vulnerable to dot combustion and the bull market giving way to the bear. Unemployment was at 4.2 in December 2001, up from the 10-year low of 2.3 percent in Dec. 2000, according to the U.S. Bureau of Labor Statistics.

Initial unemployment claims were also trending up from approximately 1,900 in September to more than 4,600 in both October and November and more than 5,500 in December 2001. For the years, initial claims were up 42 percent, according to preliminary data from the federal bureau.

After a promising third quarter, when detached single-family home sales increased 4.4 percent and condominium sales rose 2.1 percent, the Massachusetts market stumbled in the fourth quarter as sales of single-family homes slid 5.8 percent and condo sales tumbled 11 percent, according to MAR.

"The high-end housing market also suffered last year due to the corrections in the stock market and decline of the dot com industry, so we're not surprised by the drop in activity, just that it wasn't greater," Drinkwater said.

Published: February 22, 2002

Use of this article without permission is a violation of federal copyright laws.

A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.