US home sales begin to mirror the slowdown in state

The Massachusetts housing market continued to slow last month and strong evidence also emerged that home sales in the rest of the country are beginning to follow suit, according to new reports released yesterday.

Economists said a slowing US housing market could significantly affect the economy. Residential construction alone accounts for about 6 percent of economic activity, but that doesn't include sales of items new homeowners often purchase such as refrigerators, furniture, and other household items.

US existing homes sold last month at the rate of 6.6 million units a year, seasonally adjusted, down 3 percent from sales in December 2004, data from the National Association of Realtors shows. Total sales last year were 7.1 million units.

In Massachusetts, sliding sales of single-family houses caused December's total sales -- houses plus condominium units -- to decline 5.5 percent, to 5,201 units from 5,501 units in December 2004.

A dynamic is now at work in housing markets around the country that had previously hit the Massachusetts market, which experienced the biggest price gains of any state from 2000 through 2003. Rising home prices in several markets are outpacing buyers' ability to pay.

''Quite a few states are facing similar overheated markets, such as California, Nevada, Arizona, and Florida," said Gautham Iyer, regional economist for Global Insight Inc. ''They all have blistering increases in house prices."

As buyers around the country retrench in reaction to accelerating prices, various markets will ''slow down and affect the national numbers," he said. Rising mortgage interest rates, which raise the cost of buying, also dampened the market last year.

Patrick Newport, Global Insight's national economist, said the US housing slowdown is evident in weaker existing and new home sales and housing starts. ''They're all generally telling the same story. Activity is still fairly strong but it's declining," he said. ''They're going to be a drag on gross domestic product."

A close look at the Massachusetts housing market shows two contradictory trends. Last year's total sales of single-family homes -- 49,306 -- were 3.5 percent below the record set in 2004. The median house price in Massachusetts was $354,000 in December, a 2.6 percent gain for the year.

But the state's condo market surged 16.5 percent, achieving a fourth consecutive record year, with 23,089 sales. The median price in December was $275,000, up 3.8 percent.

John Ford, who owns Ford Realty on Beacon Hill, said 2005 was ''our best year on record" for gross sales -- the value of all home sales handled by his company -- and for agent commissions.

In the single-family market, sales dropped 9 percent from year-earlier levels in October, in November, and again in December. While house prices are higher than they were a year ago, the increases have moderated significantly.

And there is more downward pressure on house prices: Homeowners who sense the market has peaked are putting their houses up for sale in record numbers.

There were 46,500 single-family homes, on average, for sale in each quarter of last year, nearly 8,000 more than 2004. Barry Nystedt, a buyers' agent, said the inventory of homes for sale in Newton, where he is based, is rising more rapidly than in less-expensive cities such as Waltham.

Kimberly Blanton can be reached at blanton@globe.com .