Average Cape home now worth 3 percent less than year ago
by Cape Business staffIt’s becoming increasingly evident that the double-digit price increases for Cape housing is a frenzy of the past. Expect another 3 percent dip into 2006, say experts.
The fall of 2004 saved the housing market on Cape Cod. After a lackluster summer, home prices rose substantially from September through November, preserving the trend of double-digit appreciation.
Not so this past fall.
Home prices actually fell from October to November by one percent, dooming the fall selling season which saw a total 2.5 percent price decline for an average home between the end of August and the end of November.
The average price of a Cape home actually peaked in November 2004 at about $398,000 and now sgands at $386.000. That's three percent.
Is this the beginning of a bubble bursting?
Despite relatively weak sales volume and an uncomfortable price drop, most experts and brokers do not anticipate any kind of precipitous decline in home values as 2006 arrives.
Economists at the University of Massachusetts predict that prices in 2006 may drop about three percent, which is the exact percentage decline recorded between November 2004 and November 2005. Several local brokers and mortgage bankers contacted by Cape Business quoted the same three-percent prediction for next year.
That’s not anything approximating a burst bubble, but it sure is a sharp contrast to the last five years, which have seen the average home on Cape Cod appreciate about 88 percent.
That double-digit pace was unsustainable, according to most Realtors, who also believe that the Cape may prove more immune to a dramatic drop in home prices because of limited inventory and land, as well as a higher-income demographic than most markets elsewhere in the state and nation.
Still, expect to see home prices adjusted downward as higher interest rates turn a seller’s market into a buyer’s market for the first half of 2006. At the inventory of homes for sale rising, the time it will take to sell a house is growing as well.
The key to next year will be whether the Federal Reserve Board decides to slow down its steady increase in the federal funds rate. Latest indications suggest the board may be close to declaring a neutral position because inflation fears are waning.
A close look at figures released on December 1 by the Barnstable County Registrar of Deeds John Meade show that real estate sales volume for homes under $1 million fell 15.9 percent from the previous November, while the total value of sales was down 18.4 percent.
More telling, for the first time in years, the average price of an individual home dropped year to year by 3 percent.
Meanwhile, a 4.7 percent decrease in the volume of mortgage activity from November 2004 suggests that housing sales should continue a downward trend into the beginning of the new year.
Year to date, sales volume is down 8.3 percent; total sales value is down 3.3 percent and the price of an individual house is up 5.6 percent – with much of that appreciation occurring before summer.
Based on all property sales below $1 million, the average home on Cape Cod was $386,097 in November, compared with $398,042 a year earlier – the highest price for a home during the entire 12 months.
Real estate activity Nov. 2005 versus Nov. 2004
2005 sales volume: 7,249
2004 sales volume: 7,908
2005 total sales value: $2,796,195,404
2004 total sales value: $2,890,000,654
2005 mortgage volume: 27,183
2004 mortgage volume: 30,648
2005 total mortgage value: $6,021,380,521
2004 total mortgage value: $6,144,808,957
2005 average mortgage amount: $221,513
2004 average mortgage amount: $200,496
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