Massachusetts' five-year housing boom, which lifted the average home price by 71 percent and bolstered the local economy, is over, according to homeowners and real estate agents.
Rising mortgage costs, an outgrowth of 12 consecutive interest-rate increases by the Federal Reserve since June 2004, have cooled demand, they said. Prices have dipped, and sellers are rushing into the market even as open houses attract few prospective buyers.
''It's definitely a buyer's market, and it's likely to stay that way at least through the first half of next year," said Alan Kosinski, 49, of Stoughton, an investor who has bought and sold about 800 properties over 20 years. ''People who have to move are going to be selling at a discount or a loss."
The Fed is raising interest rates to restrain inflation. The effects of a real estate slowdown will be felt throughout the state's economy. Home-price appreciation was a powerful engine of growth as owners tapped their equity to pay for items such as cars, vacations, and college tuitions.
The median price of a single-family home in Massachusetts was $360,000 in September, down 4 percent from a record $375,000 in August, according to the Massachusetts Association of Realtors. Houses available for sale rose for the seventh month in a row to 38,319, up 1.7 percent from August. The number of transactions declined 19 percent to 4,464.
US home sales probably will dip 7.3 percent to an annualized 6.71 million this quarter after reaching an all-time high of 7.24 million in the third quarter, David Berson, chief economist of Fannie Mae, said in a Nov. 15 forecast.
Alan Clayton-Matthews, an economist with New England Economic Partnership in Walpole, said home prices in Boston probably will decline in 2006. The median price of a home in Massachusetts probably will fall ''less than 3 percent" between now and the third quarter of 2006, he forecast.
That has some buyers, such as Amy Stewart and Jason Walker, sitting on a fence. The newly married couple is shopping for a home in Somerville. They've viewed 12 homes over the last four weeks without making an offer.
''It's a balancing act," said Stewart, 29. ''If we hold out a little longer we may get a better deal, but then the interest rates will be higher."