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Newton home prices soar; schools seen as key

NEWTON -- It could be a textbook case of good public schools driving up real estate prices.

In recent years, a majority of the single-family homes in Weston, Wellesley, and Brookline have sold for more than $1 million. But Newton, a city that has long attracted families from a range of incomes, is now seeing prices reach record levels. Of the 192 single-family homes listed this week, 76 -- or 39.6 percent -- exceeded $1 million, according to the MLS Property Information Network. Of those, 28 have asking prices from $2.3 million to $4.8 million.

Realtors are not surprised at the surge in prices, noting that home values in Newton have been escalating along with the rest of the area's residential real estate since the mid-1990s.

But the sheer number of million-dollar houses now puts Newton among the ranks of the most expensive communities in the state.

And with so many expensive homes on the market in Newton all at once -- which are taking longer to sell -- brokers and other real estate specialists are wondering whether the economy is making it difficult for some middle-class buyers, who may have moved here recently for the schools, to swing such enormous mortgage payments, forcing them to sell. Others, who have lived in Newton for years, may be cashing out at what they perceive to be the top of the market.

The result: A house's average time on market for the first 11 months of this year is 100 days in Newton, up from 63 days in 2002. Last year, the percent of million-dollar homes listed for sale was 33 percent, up from 22.6 percent in 2001, accord to MLS data. As recently as 1997, the median price in Newton was $350,000. For the first 10 months of this year, the median price was $647,000, according to The Warren Group.

"Newton's prices have really taken off in the last year or two because more buyers want to be close to Boston but not in it," said Janet Edsall, a lifelong Newton resident and broker-owner of Re/Max First Realty Inc. "Newton has great schools, terrific public transportation, and 13 villages that offer a hometown feeling with the benefits of a big metropolis."

However, Elizabeth Warren, a Harvard Law School professor and coauthor of the book "The Two-Income Trap: Why Middle-Class Mothers & Fathers Are Going Broke," argues more pointedly that families, desperate to spare their children from failing urban schools, are driving up home prices and taking on more mortgage debt than they can afford in order to live in communities with top schools.

"The cost of a quality education is a home in places like Newton," said Warren. "Families are willing to pay anything to buy their way into the best public schools, and it's driving up home prices dramatically."

Newton schools have been among the outstanding districts overall statewide. But since the state implemented standardized testing known as MCAS in the late 1990s, there are now measurable standards to prove that. Its schools ranked 15th in the 2003 MCAS scores of 210 school districts, tied with Needham and ahead of neighboring Brookline and Waltham. Only Wellesley, which was tied as the top-ranked district (with Winchester), and Weston, which was 11th, did better among nearby communities. Prices in Brookline, Wellesley, and Weston are higher than in Newton, and that has put pressure on Newton's real estate.

Newton, which had entry-level homes in the $300,000-range as recently as the late 1990s in Newton Highlands, Newton Upper Falls, and Nonantum, has become out of reach for many. The Massachusetts Association of Realtors reported last week that the average cost for a single-family in the Bay State was $364,547. But the lowest priced home in Newton was $380,000 for a 123-year-old, 1,300-square-foot Colonial. Only 18 homes under $500,000 were for sale in the city.

Aaron Gornstein, executive director of the Citizens' Housing and Planning Association, has lived in Newton since he bought a three-bedroom Colonial for $325,000 in 1997. He said that as the city's home prices have skyrocketed, diversity among its residents has eroded.

"Teachers, police, and firefighters can no longer afford Newton due to the high cost of housing," Gornstein said. "Today, the most likely new residents are doctors, lawyers, and executives of financial services institutions."

For Arthur and Susan Rousakos, the prices were just too steep. The couple, living in a Newton bungalow they rented from relatives, wanted to trade up to a bigger house with a spacious yard for their two young children. But it didn't take long to discover that what they had in mind would cost $2 million in Newton.

"We love Newton and hoped to stay, but just couldn't afford the kind of house we wanted," said Arthur Rousakos, a real estate salesman in neighboring Waltham at Coleman & Sons Real Estate.

Last month, the family packed their belongings and moved 45 miles west to Charlton into a new $440,000 home on an acre of land. Their 4,400-square-foot home is four times the size of their Newton bungalow. Charlton, near Sturbridge, is part of the Charlton-Dudley Regional School District, which is ranked 62d overall for MCAS scores in 2003, lower than Newton, but still considered good.

Some brokers dismiss suggestions that a slower economy, or the rise in the state's unemployment rate from 2.7 percent at the start of 2001 to 5.5 percent for the first 10 months of 2003, have caused families to sell their luxury homes to avoid foreclosure.

'`No one is bailing out of Newton," said Carol Brenner, a Newton broker. "If people face financial trouble they rent out their home or wait for the market to turn around. I'm not seeing sales by people in financial distress."

Meanwhile, the escalation of real estate values in Newton is reflective of a nationwide trend, according to a study to be published next month by the Joint Center for Housing Studies at Harvard University. Homes worth $1 million or more are the fastest growing segment of the nation's housing market, the survey found.

The study cites US Census data showing the number of owner-occupied, single-family homes valued at $1 million or more soared to 313,779 last year, up from fewer than 200,000 in the mid-1990s.

The largest concentration of million-dollar homes is in California, where 2.3 percent of the real estate is valued at $1 million or more. Connecticut ranks third with 1.91 percent of such homes, and Massachusetts ranks fifth with just under 1 percent, according to the Census data.

"People underestimate the amount of income growth [Greater] Boston has had, and some [communities], like Newton, have been turned over to high-income wage earners moving up the income scale," said Eric Belsky, executive director of the Harvard center. "Places like Newton that are perceived as having good schools have seen the biggest lift."

The driving force behind the surge in luxury homes stems from the rapid growth in household wealth and the escalation of housing values, especially in the Northeast and California, where supply is limited, the study said. "In Massachusetts, the largest supply of these luxury homes is in suburbs like Lincoln, Weston, Sherborn, and Dover, " said Belsky. "But closer to Boston, Newton satisfies the demand for buyers who like the proximity to downtown but want a suburban flavor."

A recent survey by Coldwell Banker Real Estate Corp. found that the typical luxury-home buyer wants a four- or five-bedroom house with between 4,000 and 6,000 square feet, space criteria that many of Newton's grand old homes can meet.

But at a price.

For Arthur Rousakos, the 50-minute commute to work in the Newton area doesn't bother him, and he says he and his wife love their new place.

"We could have three more children," Rousakos said, "and still have extra room."

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