The 2012 Results Are In And Uncertainty Lies Ahead

2012-2013-boston-real-estatelThe number of single family homes sold in Massachusetts last year rose by 18.4% compared to 2011, and the median price point rose 1.8%. The number of condominium sales rose 25% and the median price went up 2.6%. For the Greater Boston Area, the numbers were even better.  The single family median home price went up 6.8%, and for condominiums it was up 10.3%. With numbers like these, it is clear that the market has hit bottom and values are recovering. In addition, towards the end of the year the numbers were even stronger, with December posting the 2nd highest number of sales on record in Greater Boston for a December.

At the same time, the rental market is also experiencing a boom. Rents in the Boston area began to show signs of upward movement last year. This year, the rental market is off to a very strong start and I believe that we will see a further increase in rents. A rental agent I work with recently remarked to me that this kind of market “only comes around about once every 15 years.”

The immediate cause of the upward pressure on prices in the local housing market is the pronounced lack of sales inventory. Based on MLS data, the early February residential sales inventory for the downtown Boston neighborhoods for the past few years is as follows:

2010: 1185

2011: 987

2012: 798

2013: 417

Statistically, the situation is similar in most of eastern Massachusetts.  Almost all the real estate agents that I speak with regularly report that demand is substantial, and the “squeeze” is creating a situation where prices are rising fast.  There is no consensus, however, as to the reason for the dramatic reduction in inventory. In my opinion, we are in a market-wide catch-22 “gridlock” situation. Those potential sellers who would like to move locally don’t see much on the market to buy. Without the confidence that they can find a new place, they won’t  put their house on the market. Simply put, it isn’t a good time to sell because there is nowhere to go. The only people putting their homes on the market are those who are truly under real pressure to move. As the spring market is still just getting started, however, the situation may straighten itself out. On the other hand, it may not and we could just continue to see tight inventory leading to higher prices. Either way, we will find out.

Take a look at this month’s Keller Williams video newsletter

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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A Peek at the Ultra High-End

Hi. Welcome to my new blog. If you are reading this you are also reading the very first entry.

Did you happen to read the Boston Globe on Friday July 8th? You might have caught the front page article entitled “What price luxury.” See the Boston.com article here. In a nut shell, the 6,829 square foot Penthouse at the Mandarin on Boylston Street in the Back Bay just sold for $13.2M (Hey you do get 4 parking spaces for your $10,000+ per month condo fee, and 3000 sqft of deck space). The sellers paid about $13.1M about 3 years ago, and never even moved in. secure server . Interestingly, these same sellers put it on the market for $16.99M and it took 32 months for it to sell.

This appears to me to be the most expensive condominium ever sold in the city of Boston. Second Place goes to another Mandarin unit that recently sold for $12.2M and 3rd place to a Penthouse Unit at 51 Comm. Ave. that sold last year for $10.8M. That unit took 4 years to sell. Currently there two other off-the-charts Penthouses available. One at the new Clarendon for $6.75M and the other at the Four Seasons for $8M. If you’re really interested in the Clarendon unit, ask me about as I saw it a couple of weeks ago.

New York has had $10M+ apartments for a long time so why not Boston? I don’t think it says too much about the real estate market in general. One, it means that Boston is attracting some of the super rich. That is good as it helps maintain Boston’s reputation as a world class city. And two, no matter what the price range, overpricing your property is still a bad strategy.

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