What really happened this spring in the real estate market?

inventorySo much has been written about what happened this spring. Most of it is about prices going up, bidding wars and the lack of inventory. Now that the summer is a few months behind us, and most properties that went under agreement by the end of the summer have closed, we can look at what actually happened. I have analyzed the numbers that I think matter most.

Downtown
An analysis of the closed sales of all the more upscale downtown Boston neighborhoods, from Charlestown to South Boston to Jamaica Plain, show that the median price of a residential home, including condominiums, single families and multi-families, rose about 10% in 2013 from the same time in 2012. In 2012 it was up about 6% from 2011. The recent figures are substantial, but not mind-boggling. The mind-boggling numbers are the average “days-on-market” statistics. In 2011, average days-on-market was 97. That figure fell 17% to 76 days in 2012, and then fell another 47% to 40 days in 2013. Surprisingly, the inventory has been fairly consistent. The number of homes sold fell 20% from 2011 to 2012 but then stayed about even for 2013.

Cambridge
Cambridge’s value numbers are more dramatic. Up 6% from 2011 to 2012, and then up another 17% from 2012 to 2013. Days on market fell 28% from 72 in 2011 to 52 in 2012, and then another 35% in 2013 to 34. I would consider this number for days on market in the ‘mind boggling’ category.

Brookline
Brookline’s value numbers are quite different. Values actually fell about 1.5% from 2011 to 2012, and then rose 14% from 2012 to 2013. dns database Days on market fell about 27% from 82 in 2011 to 60 in 2012, and then another 38% to 37 in 2013. Here again, the days on market falls in the “mind boggling’ category.

High End Suburban snapshot (Lexington, Wellesley, Weston, Winchester)
I thought it would be interesting to look at the numbers of these 4 “high-end” suburbs considered together. Here is what I found: prices increased 2% from 2011 to 2012, and then went up 13% in 2013. Days on market stayed flat at 107 from 2011 to 2012, but decreased by 35% to 70 for 2013.

All in all, it was one hell of a spring.

5 Stats that Determine the Real Estate Market

housingPeople often ask me, “How’s the market?” The answer is clearly subjective, but careful analysis of the following statistics leads to at least an educated subjective judgment:

1.Value

Values or prices are usually expressed in terms of how the median price of closed sales compare year-to-year or month-to-month. Because the seasons strongly affect home sales, I recommend considering the median prices for any given month compared to the same month a year ago:

  • In April 2012, the median selling price of single family homes in the greater Boston area fell 2.5%, and condominium prices were up 6%, compared to April  2011.

 2. Volume

The most relevant statistic for sales volume (the number of homes sold) is the number of homes sold compared to the same month a year ago.

  •  The number of single family homes sold in the greater Boston area was up 11%, while condos were up 18.5%.

 3. Inventory

Take a look at how many homes are on the market compared to a year ago.

  •  The inventory of single family homes was down 10% in April, and for condos the inventory was down a whopping 30%.

 4. Days on Market

Still relevant but not quite as important, are the figures for “days on market and “supply.” This is the average time it takes a home to go under contract.

  •  The average days on market for real estate in the greater Boston area stayed relatively stable, declining two days from 122 to 120 days for April 2012 compared to April 2011. For condos, the time fell 19 days from 117 days to 98 days.

 5. Supply

The “supply” is the number of homes on the market divided by the monthly rate that they are selling. For example, if there are 50 homes on the market and 120 homes sold over the past 12 months (an average of 10 per month), there is a 5 month supply. Most experts consider somewhere between 7.5 and 8.5 months supply of homes a fairly balanced market.

  •  The supply of single family homes was down about 10% from 7.9 months in April 2011 to just 6.4 months of supply in April 2012. There was a 4.8 month supply of condominiums available in April, down sharply from April of one year ago when there was an 8.2 month supply.

 If you can get the answer to these statistical questions for the geographic area (neighborhood, town, city, state, or country) that you are interested in, you should have a pretty clear picture of what the real estate market is doing. So how’s the greater Boston area market doing? My analysis is that the greater Boston area is experiencing a transition to more of a seller’s market. The supply is shrinking and demand appears to be growing, pushing prices up and making it easier for sellers to sell. What’s your analysis?

The figures for this post can be found here on the Great Boston Association of Realtors site.

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