Last modified: Sunday, April 27, 2008 2:00 AM EDT Experts predicting slowdown to stick around for a while BY RICK FOSTER SUN CHRONICLE STAFF As foreclosures and declining real estate sales turn the American Dream of home ownership into a nightmare for more and more families, many consumers are asking: How much longer can this go on? Despite scattered signs of a revival, industry observers say they're not expecting a general recovery anytime soon in the number or value of real estate sales. Meanwhile, sales of both new and existing homes fell again nationally in March, according to the National Association of Realtors - the seventh time in the last eight months the numbers have tanked. "There are a lot of unpleasant realities out there," said Steve McLinden, veteran real estate journalist and columnist for Bankrate.com. "Sellers are really taking it in the chops." Real estate professionals say tightening of credit, an upsurge in foreclosures and potential buyers' economic worries are helping to keep the market in a tizzy. Tim Warren, CEO of The Warren Group, which tracks real estate sales statistics in the Bay State, was burned by an earlier prediction that sales were about to turn around. Currently, he's not counting on an upturn anytime before spring of 2009. There are plenty of reasons to be pessimistic, says Warren. First, subprime mortgages that allowed large numbers of lower-income buyers to bid for homes in the last several years have all but disappeared. And that means fewer buyers are in the market. "The lack of qualified buyers goes a long way to explain the decline in sales volume," Warren said. "If you can't get a loan, you can't buy a house." Second, because many of those who bought houses with easy money are now unable to pay their mortages, foreclosed properties are entering the market at brisk rate. While that may mean some bargains for purchasers, foreclosures pose tough competition for normal sellers and makes it harder for them to get their asking price. "Foreclosures are flooding the market and show no sign of abating," Warren said. Foreclosure petitions on all forms of Massachusetts property ballooned from 1,029 in January 2005 to 3,212 this past January. More worrisome is the fact that the number of foreclosures, in relation to total sales, have gone up markedly. In 2005, there was only one petition for foreclosure for every 11 sales while in 2007 the ratio was one foreclosure for every three sales. Meanwhile, sales of Bay State homes continue to decline. The Massachusetts Association of Realtors reported recently that single-family home sales were down 22.9 percent and median sales prices declined 4.6 percent in February compared to the same month a year earlier. Condominium sales also suffered. A lot of inventory John Bitner, chief economist for Eastern Bank, agrees the market has a long way to go before a turnaround can be expected. Normally, there's a four-month supply of homes on the market at any one time, Bitner said. Currently, inventories are up to the nine- 10-month level. And new homes and condominiums permitted before the full extent of the mortgage crisis became apparent are only just now being completed. "We've got a lot of inventory to work through," said Bitner, who sees continuing price declines and slow sales until at least next spring. However, once the market breaks, pent-up demand generated by buyers waiting for prices to bottom out could give rise to a new fever of real estate purchases. The decline in real estate sales has produced trying times for realty agents and appraisers, forcing area some brokers to close or consolidate offices. But a few have seized on the declining market as an opportunity to market foreclosures or bank-owned properties. One Dartmouth Realtor arranged a bus tour of bank-owned properties throughout southeastern Massachusetts. Prospective buyers were shown more than a dozen distressed homes. General economic conditions don't seem to auger a quick recovery. Massachusetts' population is stagnating while that of sunbelt states is expanding according to the latest measurements, exerting moderating forces on demand. And continued retrenchment in manufacturing jobs and slow growth elsewhere means that potential buyers are having a hard time affording homes. However, Ken Fears, senior economist for the National Association of Realtors, sees hope for a firming of the real estate market in the second and third quarters of this year both because of the normal seasonal lift and because declining prices and interest rates should begin to stimulate demand. Prices remain stable While prices of single- and multi-family homes have cooled dramatically, experts point out, that's not necessarily a disaster for homeowners. Although the median price of a single-family, detached home in the Bay State has declined a little over 2 percent in the past two years, that's nothing compared to the benefits homeowners have reaped from the mammoth increase in home values over the past decade. According to statistics compiled by the Massachusetts Association of Realtors, the average price of a home in Massachusetts was a shade over $200,000 in 1997. Last year, the median price stood at $345,000. Homes in Southeastern Massachusetts, meanwhile, more than doubled in price from $129,000 to $270,000 over the same period. "The bottom line is that for most homeowners, there's plenty of equity in their property as long as they haven't been refinancing and using their homes like ATM machines," said Dara Perry, office manager at the Remax Real Estate Center in North Attleboro.