Home prices fall for 15th month
Home prices in Massachusetts fell for the 15th straight month in July, and the turmoil in the mortgage market in recent weeks is likely to drive prices down further this year.
The median price for a single-family home has dropped 4.6 percent, to $323,000, since July 2006, Warren Group, a Boston real estate and publishing firm, said yesterday. July’s sales volume increased 1.5 percent from a year ago, but analysts said it was a short-term rise brought on by a surge of parents buying homes prior to the new school year in September. The median price for a condominium rose less than 1 percent, to $280,000, Warren said.
Real Estate analysts said a recovery will be delayed until 2008 as a crisis in the mortgage industry hits a housing market already reeling from an explosion in the number of foreclosures and an increase in homeowners in financial distress because of rising mortgage rates and falling home values. Earlier in the slump, sales slowed because stubborn sellers refused to lower their prices to adjust to new market realities. Sellers have reduced their prices, but buyers are now facing increased scrutiny when they try to obtain financing.
“People who are ready, willing, and able to buy a house can’t do it because they can’t find a mortgage,” said Timothy Warren Jr., Warren Group’s chief executive. “That’s got to be bad.”
Early this year, problems in the lending market were confined to so-called subprime lenders, those that made loans to borrowers with credit problems. Since then, the problems have spread to conventional lenders as the Wall Street investors who buy mortgages have suffered losses from mounting mortgage delinquencies.
Last week, the nation’s largest lender, Countrywide Financial Corp., was forced to tap into an $11.5 billion credit line from its banks, causing the stock market to plummet, and this week Countrywide laid off some staff.
The credit crunch spread this week to other lenders such as Capital One Financial Corp., which closed its GreenPoint Mortgage unit, and Thornburg Mortgage Inc., which said this week it would scale back jumbo mortgages, or loans that exceed $417,000. Conventional mortgages below that amount are more widely available because the government-created agencies Freddie Mac and Fannie Mae buy those loans to help support the housing market. No such support exists for jumbo mortgages.
As a result, lenders who make jumbo mortgages have sharply increased rates in the past two weeks to nearly 8 percent. Freddie Mac’s rate for a traditional, 30-year mortgage is 6.62 percent.
To calm financial markets last week, the Federal Reserve Board cut the discount rate it charges for loans to banks by a half percentage point, to 5.75 percent.
Kevin Cuff, president of the Massachusetts Mortgage Bankers Association, said if Countrywide stops making mortgages, other lenders would be unable to fill such a big gap.