Over 46% of homes currently on the market in the Boston metro area have had price reductions, as sellers take steps to deal with a slower real estate market and higher inventory levels, according to a new study by ZipRealty.

Inventory level has increased precipitiously, over the past year. There are currently over 45,000 homes and condos for sale in Greater Boston.

More information: Rising Inventories Weigh on Home Prices - The Wall Street Journal

From WCVB-TV, Channel 5:

Quarterly home sales are down in a widespread area of Massachusetts, but prices are only down slightly.

[In fact, prices have dropped only 1.3%, according to the Massachusetts Association of Realtors.]

… in the Boston area, home sales are down 4.6 percent, sales in the northeast are down nearly 14 percent, central Massachusetts sales are down almost 16 percent and on the Cape, sales are down almost 19 percent.

Some sellers are becoming more and more frustrated with the real estate market.

After some serious renovations to his house last year, Bill Valentine put his antique Walpole home up for sale, but has had few visitors and fewer offers.

“We dropped the price $30,000 recently,” Valentine said.

Realtor David Wluka said that last week’s lookers liked the house, but their offer wasn’t within spitting range of Valentine’s asking price of $569,000.

“The buyers are ready. The sellers have yet to come to terms with the shift in prices, and when the prices adjust themselves a little bit more, buyers will come back out in the market,” Wluka said.

Source: Sellers Frustrated With Real Estate Market - WCVB-TV

From The Boston Business Journal:

Although most regions of the state saw single-family sales declines of 14 percent to 19 percent in the second quarter ending in June, Greater Boston’s decline was a relatively modest 4.6 percent, and the median price actually rose 0.6 percent. Condo sales in Greater Boston dropped 8 percent, and the median price declined 2.1 percent.

“Greater Boston” is undefined. It doesn’t include just the city of Boston - it includes Revere, Chelsea, and perhaps other cities, in the area.

Overall, Massachusetts saw a drop in sales, but only a slight drop in prices:

Single-family home sales in Massachusetts dropped nearly 11 percent in the second quarter compared to the same period last year, and condominium sales dropped nearly 9 percent, according to the Massachusetts Association of Realtors. Prices, however, slipped only 1.3 percent for single-family homes and stayed flat for condos.

Single-family homes stayed on the market an average of 120 days before selling, compared to 95 days in 2005. The selling time for condos jumped to 112 days from 81 days. The reason: A growth of inventory of single-family homes and condos, to 63,433 from 49,931 last year.

Oddly, this happened:

Southeast Massachusetts saw a startling 23 percent increase in the median price for condos, along with a 27 percent rise in sales.

Source: Mass. home sales drop again, prices remain stable - The Boston Business Journal

From The Boston Globe:

Condominium sales for downtown Boston and adjacent neighborhoods such as the Back Bay and the South End fell 12 percent as the median selling price declined 4 percent to $454,500, according to a second-quarter sales summary issued yesterday (July 28, 2006) by Listing Information Network, or LINK.

LINK, which tracks sales in such neighborhoods as downtown, Charlestown, the Fenway, the North End, and South Boston, reported that the number of condos sold during the second quarter was 1,048, down from 1,196 a year ago. The second-quarter median selling price for all neighborhoods that Link tracks was $454,500, down from $475,000.

The condo market may get very crowded, in the near future.

Local real estate company Otis & Ahearn, working with Pam McKinney of Byrne McKinney & Associates, a real estate consulting firm, recently completed a market analysis that estimates that between 2004 and 2008, 3,979 condominiums will have been built in many Boston and East Cambridge neighborhoods; 60 percent have been purchased or reserved.

Source: Downtown condo sales drop 12% - By Chris Reidy, The Boston Globe

A lot of people (experts, even) think the housing market is overvalued.

This had led to buyers deciding to wait it out, hold off buying a new home until prices fall.

Some of these people have never owned; some of these people are selling their current homes, and becoming renters, at least for the time being.

No one has a crystal ball. People on the sidelines are assuming that prices will go down, but they should also be watching interest rates. The higher the rate, the higher the payment, all other things held constant.

Median condo sales prices have not dropped, at all, in the city of Boston. The volume of sales has dropped, by about 25%, but not the prices, themselves.

Prospective buyers may have a long wait on their hands, if they’re looking for a bargain. It might never happen. As prices drop, interest rates have risen, making buyers’ mortgage loan payments about the same as before.

Meanwhile, they’ll have to deal with rents going up, due to the low vacancy rate.

From this week’s Business Week:

Economists have twisted themselves in knots trying to explain why housing prices in cities like San Francisco and Boston are so high. One theory says that the cities have better amenities. Another says that moving to these cities makes workers more productive (presumably because of the higher quality of their colleagues) so people will pay more to live there.

Lately, though, three economists from Philadelphia and New York have been pushing a completely different argument …

Simply put, a certain percentage of rich Americans would like to live for whatever reason in, say, San Francisco. But at some point, there’s no more room to build there. So the arrivistes have to pay a premium to move in. Prices go up …

What goes for San Francisco goes for other superstar cities such as Los Angeles, Boston, New York, and Seattle, say the authors …

The authors sum it up this way: “Living in a superstar city is like owning a scarce luxury good.”

Hmmm. Well, this writer’s blog entry sure made me feel wealthy and privileged, I don’t know about you. And, I only own a one bedroom apartment!

Full story: San Francisco, Boston, and Other ‘Superstar Cities’ - By Peter Coy, Business Week, by way of Matrix - By Jonathan J Miller

Original study: Superstar Cities (.pdf) - By Joseph Gyourko & Todd Sinai and Christopher Mayer