Home Buying

Massachusetts home sellers being forced to drop their asking price, in these towns most of all

The percentage of listings in the Boston area with price reductions is now up over 21 percent.

Michele McDonald

July 28, 2015

3 minutes to read

The Boston area’s red hot real estate market has suddenly become a lot more volatile, with price cuts and scuttled home sales both on the rise.

That’s the takeaway of two new reports tracking the health of the real estate market in Greater Boston and across the state.

The percentage of listings in the Boston area with price reductions is now up over 21 percent, compared to 20 percent last year, Redfin reports, with a growing number of listings in Boston and the inner suburbs sporting price cuts.

Both years are up markedly from the summer of 2013, when roughly 17 percent of all listings were price reduced.

Domino effect

Meanwhile, anywhere from 13 to 20 percent of all sales are falling through before they close, an analysis of monthly pending sales numbers put out by the Massachusetts Association of Realtors shows.

When one sale falls through, it can disrupt a whole chain of deals, especially if it involves a move-up buyer who is planning to sell their house, brokers say.

“It’s this kind of domino effect,’’ said James Gulden, a Redfin agent working out of the company’s Boston area office. “If one piece doesn’t go forward, then the next piece won’t go forward.’’

Where are homes selling below their original listing price?

Arlington, Melrose, Concord, Lexington, Hopkinton, Andover, Wellesley and Winchester are some of the most prominent suburbs that have seen a surge in price cutting.

Arlington has seen a 23 percent increase over last year in homes with price reductions, bringing the total of listings with at least one price cut to more than 45 percent, according to Redfin.

Here’s how the other towns stack up:

• Melrose was up 15 percent year-over-year to 35 percent total.

• Concord was up 11 percent year-over-year and 27 percent total.

• Hopkinton was up 19 percent year-over-year and 35 percent total.

• Andover was up 16 percent year-over-year and 37 percent total.

• Wellesley was up 18 percent year-over-year and 39 percent total.

• Winchester was up 13 percent year-over-year and 38 percent total.

Sleepy Millis saw both one of the biggest increases in price reductions, as well as the largest percent overall of listings with price reductions, at 36 and 51 percent respectively, Redfin reports.

Deals that fall through entirely

Along with rising numbers of price discounts, an increasing number of buyers and sellers are getting cold feet and pulling out of home sales before they close.

Pending sales, which are announced monthly by the Massachusetts Association of Realtors, are often viewed as an indicator of future real estate activity. Effectively, these are tentative deals in which a purchase and sales agreement has been signed but with the official closing, and final sale, still a couple months away.

However, while pending sales have risen, often by double digits, for 27 of the past 28 months, closed sales, which are the main real estate market indicator, have either fallen or been stagnant over the past several months, suggesting a significant percent of deals are going south before they can be closed.

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The number of pending sales rose more than 11 percent last year across Massachusetts, according to MAR, even though the number of sales that actually closed and became official dropped 2 percent.

The pattern continued into this spring, with pending sales shooting up 14 percent in March, even as closed sales in May, when many of those tentative sales should have closed, actually fell more than five percent, MAR stats show.

Amid fierce bidding wars in which going over asking price and waiving financing and inspection contingencies have become the norm, some buyers are getting cold feet, brokers say.

“They are worried they are paying too much, there is all this stuff they have to do with the house – it just scares them,’’ said Zachary Christman, a Hammond Residential Real Estate broker working the Newton/Brookline market. “There is no doubt about it. The buyers, when they realize they are paying five or six figures over asking, it just makes everything else that much more scary.’’