Greater Boston Real Estate Market Data, December 2012

The Single-Family Home Market:

• Sales of detached single-family homes improved for a third consecutive month in December, rising 11.8 percent on an annual basis over the same month last year. While Decembers sales gain was more modest than the two previous months, when home sales rose 31% and 28% in November and October respectively, it marks the seventeenth time in the past 18 months that single-family homes sales have increased on an annual basis in Greater Boston. Furthermore, the 833 homes sold this December is the most for the month in eight years, dating back to 2004 when 945 homes were sold.

Notably, in the fourth quarter of 2012, sales rose 23.4 percent over the same three month period last year, which eclipsed the sales gains observed in the three previous quarters of the year. In addition, it was the busiest year for home sales in eight years, as sales increased 20 percent from 2011 to 10,886 closed transactions, the most since 11,178 homes sold in 2004.

The strong sales activity observed during the final quarter of the year reflects rising consumer confidence, as an improved jobs market, appreciating home values, and record low mortgage rates have motivated increasingly larger numbers of home buyers to get off the fence in recent months. Concerns over potential changes to the tax code, especially with the capital gains rate and exclusions, also helped to spark activity in high-end home sales late in the year.

• On a month-to-month basis, detached single-family home sales declined for the first time in three months, falling 9.3 percent in December from one month earlier. The decrease is due in part to an unexpectedly sharp increase in sales volume of nearly 14 percent between October and November that occurred after new inventory hit market after Labor Day. Not withstanding the sales growth of the two prior months, its much more common for sales activity to slide from month-to-month throughout the autumn and winter due to the seasonal nature of homes sales in New England.
• The monthly median selling price for detached single-family homes posted its second largest increase of the year in December, climbing 6.8 percent on an annual basis to $470,000. This follows a nearly 6 percent annual increase in the monthly median selling price in November and 10 percent jump in the median price in October, and marks the first time since September November 2010 that the single-family median home price has risen for three consecutive months. The median selling price for single-family homes also improved on a month-to-month basis, increasing 5.5 percent over a downwardly revised October median selling price of $445,550.

An extremely limited supply of homes for sale, fewer distressed property sales, and strong activity in high-end housing market have all contributed to the appreciation in home prices over the past year. In particular, todays tight supply of listings is producing more multiple offer situations and thats elevating prices as evidenced by an increase of over 2 percent in the percent of original list price to selling price which rose from 92.1% last December to 94.2% in December 2012. In addition, sales of homes priced at or above $800,000 rose 40 percent in the last 12 months (from 118 in December 2011 to 166 in December 2012) and homes valued at $1 million or more rose 50 percent (from 70 to 105).

Historically speaking, Decembers median selling price is 12.8 percent below the all-time high monthly median price of $539,000 set in August 2005, but up 34 percent from March 2009, when the median price bottomed out at $350,000 during the recession.

• The average list time for homes sold in December declined by two weeks over the past 12 months to 98 days. This marks the tenth consecutive month in which the average time to sell a single-family home has decreased on an annual basis in Greater Boston. However, on a month-to-month basis, the average market time rose by slightly more than a week (8 days) from November. This can be attributed to the sharp decline in available inventory for sale (more than 900 fewer homes were listed for sale in December compared to November), as well as the traditional slowdown in buyer activity around the holidays. Notably, the average list time for single-family homes in December is equal to the average market time for all single-family homes sold over the entire 12 months of 2012.
• Pending home sales rose on an annual basis for a twentieth consecutive month in December, climbing 9.5 percent over the same month last year to 624 homes placed under contract. On a month-to-monh basis, pending sales declined 22.5 percent from November and re now at thir lowest level since January 2012 when 545 homes went under agreement. This decrease is not unexpected, however, given that sales activity typically declines during the traditional holiday period and colder weather months of NovemberFebruary, especially in New England.
• The inventory of detached single-family homes for sale declined on an annual basis by 37 percent in December, making this the fourteenth time in the past 15 months that the number of homes on the market has declined from the same month one year earlier. There were nearly 1,400 fewer homes on the market this December compared to the same month last year, and the 2,296 homes listed for sale last month is the lowest inventory of single-family homes in Greater Boston during the month of December in over 10 years. Todays tighter inventory level is the result of many homeowners being underwater on their mortgages and unable to sell, as well as resistance among older, empty-nester households who are waiting for their homes to regain more of their value before listing it for sale. In the near term, this means fewer homes for home buyers to choose from and a higher probability of competitive, multiple offer situations that buyers will face.

The inventory of homes for sale as expressed in months of supply also shrunk in December to nearly half of what is was one year ago. At the current sales pace, there was 2.8 months of supply this December, compared to 4.9 months in December 2011. This is the lowest supply level since August when there was a 3 month supply of homes available for sale, and is insufficient to meet the present demand for housing, even with fewer buyers in the market at this time of year. Notably, a balanced market for buyers and sellers occurs when there is 7.5 8.5 months of supply on the market. As a result, todays tight housing supply is preventing stronger sales activity from occurring in many communities.

The Condominium Market:

• Similar to the single-family housing market, condominium sales rose steadily in December to their highest level for the month in eight years. A total of 758 condo units were sold in December 2012, an increase of 17.5 percent over last Decembers sales volume and the most since December 2004 when 830 units were sold. This marks the twelfth consecutive month in which condo sales have improved on an annual basis, with double-digit sales gains observed on a year-to-year basis during each month in 2012. Empty-nesters, dual-income echo-boomer households, and investors are all helping to drive demand for condos in the current market.

On a month-to-month basis, condo sales were essentially stable, down just two units from an upwardly revised 760 units sold in November.

Historically, last months sales total ranks as the second best on record for the month of December in Greater Boston, topped only by the 830 units sold in December 2004.

In the fourth quarter of 2012, sales rose 28 percent over the same three month period last year, which eclipsed the sales gains observed in the three previous quarters of the year. In addition, it was the busiest year for home sales in five years, as sales increased nearly 22 percent from 2011 to 9,680 closed transactions, the most since 10,321 condos sold in 2007.

• The condo median selling price rose for an eleventh consecutive month in December, increasing 10.3 percent over the past 12 months to $380,000. Its the largest percentage increase in median price on an annual basis since May 2011 when the price increased 11.3 percent from the previous May. The last time the monthly median selling price for condominiums increased for 11 consecutive months on an annual basis was March 2007 January 2008.

The median selling price for condominiums was unchanged on a month-to-month basis, holding steady from November at $380,000. This price rebound follows four consecutive months in which the median price decreased on a monthly basis from a record high median of $400,000 set this past June.

The steady rise in median selling prices over the past 11 months is due in large part to a severely limited inventory of condos for sale, which is down over 40 percent on an annual basis from the same month last year, thus leading to competitive, multi-offer bidding situations for many properties. This is evident in the increase over the past year of nearly 3 percentage points in the amount of original list price to sales price sellers are receiving for their units, which rose from 93% last December to 96.2% in December 2012.

Notably, as was the case in the detached single-family home market, there was a huge spike in the upper-end of the condo market in December, with the sale of luxury units priced at $800,000 or above increasing 56 percent over the past year from 67 in December 2011 to 105 in the same month this year, while the number of condos valued at $1 million or more is up 70 percent over the past 12 months from 37 last December to 63 in December 2012.

While Decembers median price is down a modest 5 percent from the record median price of $400,000 set this past June, it is 40 percent higher than the lowest median selling price reported in the recent market correction, which occurred in January 2009 when the monthly median price bottomed out at $270,000.

• The average time it took for condominiums to sell fell by more than one month (36 days) over the past 12 months to an average of 84 days, an indication that buyer demand is outpacing the supply of available inventory of condos for sale at the moment. The average market time for condos sold in December also is more than one week (8 days) below the this years monthly days on market average of 92 days.
• Pending sales of condominiums increased for the nineteenth time in the past 20 months, increasing 9 percent over December 2011. On a month-to-month basis, pending sales declined by 23 percent from November and are now at their lowest level since January 2012 when 484 homes went under agreement.
• The number of condos on the market declined for a seventeenth consecutive month in December, falling 44.4 percent to 1,568 condos for sale. The current inventory level is now at its lowest point in more than a decade. At the current sales pace there is roughly a 2.1 month supply of condos available for sale, which is down steadily from a 2.8 month supply in November and sharply from one year ago when there was a 4.4 month supply in December 2011. The shortage of listings is putting upward pressure on prices and preventing an even stronger rebound in sales activity from occurring, especially in suburban communities and among empty-nesters and single first-time home buyers who are often not interested in home maintenance activity.