By Pete Stidman
News Editor

Short-selling, foreclosure sales, a buyer's market and worse have continued downward pressure on housing sale prices in Dorchester through the fall and winter months, particularly in the multi-family market. Some are selling for a fraction of what they did just two or three years ago.

The more desirable neighborhoods - just about everything along the MBTA's Red Line&emdash;are the least affected, say brokers, with other areas to the west - without subway connections&emdash;in a virtual freefall.

"I wouldn't be surprised if it didn't hit bottom until the end of next year," said John Anderson, a local real estate broker and creator of The Real Estate Analyst website. "Three-families in Dorchester are down 35 percent from their peak, which is a lot."

Single families have come down 26 percent, added Anderson, while condos have been less affected.

"The west side and Mattapan has had some huge price drops," said Justin Green of Just In Boston Properties. "There's a house we listed at 30-32 Westmore Rd. for $459,000, we originally wanted to list it for $429,000 because of a house down the street that was the same 1920s-style two-family. It never sold. But the other house sold for $292,000 or $299,000, so that tells me they've had a tremendous drop."

According to MLS data obtained for the Reporter by Green, the average sale prices for multi-families in Dorchester peaked at around $531,000 in the second quarter of 2005, and have since fallen to just under $387,000 in the last quarter of 2007. So far in 2008, the average is a mere $319,895.

The reasons for the shrinking price tags are multiple. The most obvious factor is the sub-prime mortgage crisis, which made it more difficult to acquire financing for new buyers and produced scads of foreclosure auctions and short sales by owners looking for a way out of mortgages that can amount to more money than their properties are now worth.

Short selling occurs when owners facing foreclosure negotiate with their mortgage lender to sell their house for what they can get, give the proceeds to the lender and call it even.

One three-decker at 22 Lyon St. near Glover's Corner is currently listed for only $215,000, a likely example of a short sale. The current owner gutted the place with an eye toward rehabbing and perhaps selling it off as condos, according to realtors, but ran out of steam and money and is now facing foreclosure. In 2005, he paid $377,000 for the property.

A less examined reason for the sinking market could be a decrease in fraud brought about by increased media and governmental focus on the sub-prime lending crisis. Several properties previously detailed in the Reporter appear to have been sold under curious circumstances.

An example is a set of transactions that Anderson deems suspicious at 59 Armandine Street. The three-decker was purchased in November 2005 for $569,000 and converted into condos. Each of the three units sold for $270,000 by July 2006 to three separate buyers, according the Suffolk Registry of Deeds. Each buyer took out two mortgages, one for $216,000 and one for $54,000. All three units began foreclosure proceedings by February 2007 and all were foreclosed upon by October of the same year.

Anderson questions whether the three buyers actually intended to pay their mortgage, or if they existed only on paper. At the end of January, one buyer snapped up all three condos at 59 Armandine from the various banks for around $100,000 a piece. On the same day, the new owner sold the entire building to another buyer for $450,000, a rare example of a reverse condo conversion.

The latest round of predictions from local and national experts are beginning to point to the end of 2009 as a possible turnaround date in real estate prices and the sub-prime crisis, but no one seems to be holding their breath. The Federal Reserve Board estimates that well over 1,500 sub-prime adjustable rate mortgages have yet to hit their rate reset dates in Boston, with the majority hitting between now and October. As was true with last years 703 foreclosures citywide, Dorchester can expect to bear the worst of what is to come.

"The bottom line is things are going to get worse before the get better," said Department of Neighborhood Development spokesperson Lucy Warsh, who has been participating in the city's Foreclosure Intervention Team.

But according to a few of Dorchester's most prolific real estate brokers, it's all about the neighborhood. Places like Savin Hill, Jones Hill, and Ashmont are selling at lower prices, but they're still selling, and the standard condo conversion can still be found.

"Those areas have depreciated from their high, but they're still very pricey," said Eric Gould of At Home Realty. "We just sold a three-decker in Savin Hill over the bridge for $590,000 and that guy got it for a steal. Condos are still selling pretty briskly on the high end, but things are a bit worse where there is no T access. It's a little more difficult to get the high prices."

"In that location [Savin Hill over the bridge], condos go for the high twos or low threes, the numbers just work for developers over there," said Green.

Deals can be had in the hot spots, brokers said, but it's often the fruit of other's misfortunes. One condo near Ashmont - which sold for $309,000 three years ago and was foreclosed upon - is now under agreement for $210,000, said Gould.

"There has been bidding wars for this stuff," said Green. "You just got to spot it when it comes in."