Sales of multifamily homes fell across Massachusetts for the first time in five years in 2005, declining 15.1 percent from a record 9,401 sales in 2004 to 7,980 last year, according to data compiled by the Massachusetts Association of Realtors.
The slowdown is due to escalating property values, rising energy prices and higher vacancy rates brought on by a steady increase in condo conversions and multifamily housing construction in recent years that has softened demand among investors and made the market less attractive to first-time home buyers, MAR reported.
“The multifamily housing market has experienced record demand over the past three years and that’s led to strong price appreciation, but also priced others out of the market,” said MAR President David Wluka of Wluka Real Estate in Sharon. “Entry-level buyers have come to find that duplexes and triple-deckers are no longer the affordable starter-home option they once were, while investors have started to look to other less costly markets, outside the region, to buy,” he said.
Regionally, every area of the state saw a decrease in two- to four-family home sales in 2005, with modest declines of 2 percent-4 percent reported in Southeastern and Western Massachusetts, 7 percent-10 percent declines observed in Barnstable County (Cape Cod) and greater Boston, and declines in excess of the 15 percent drop in statewide sales volume occurring elsewhere.
“In some sectors, the market has become overvalued, and with rents down and vacancy rates up due to a surge in condo conversions in recent years, it’s not surprising to see that demand has softened over the past year,” said Wluka.
Nonetheless, despite the slower sales pace last year, the number of two- to four-family homes sold in 2005 was the third highest in state history, exceeded only by the 9,401 multifamily homes sold in 2004 and the 8,086 homes sold in 2003.
Further evidence that demand for multifamily properties remains historically strong is visible in the median selling price data found in the MAR report. During the past year, the statewide median selling price for two- to four-family homes rose sharply by nearly 17.5 percent, increasing from a median price of $315,000 in 2004 to $369,900 in 2005. Regionally, median selling prices increased 14 percent-15 percent in greater Boston and the Northeast region, 18 percent-19 percent on the South Shore and Southeastern Mass., 21 percent in Worcester County, 37 percent in Barnstable County, and 43 percent in Western Mass.
The rate of price appreciation in the multifamily market outpaced the annual price gains in the detached single-family and condominium markets last year, where prices rose 5.9 percent and 6.6 percent, respectively, on a statewide basis.