Greater Boston Real Estate Market Trends, February 2013

The Single-Family Home Market:

• Sales of detached single-family homes declined in February for the first time in five months, sliding 7 percent on an annual basis from the same month last year. This is just the second decrease in monthly single-family home sales in the past 20 months, and was not completely unexpected. The decline in sales can be attributed to todays low inventory of homes for sale, as well as a series of strong snowstorms this winter that has delayed closings and cooled buyer activity, and the fact that 2012 was a leap year which included an additional day for transactions to close compared to this February. Despite the slowdown in sales activity, the 429 detached single-family homes sold last month represents the second highest February sales total in the past six years topped only by the 464 homes sold in February 2012, and is the thirteenth highest sales total for the month of February on record in Greater Boston.
• On a month-to-month basis, detached single-family home sales also declined in February, slipping for a third consecutive month. The sales decrease of 29 percent from Januarys upwardly revised sales total of 604 homes sold follows a 27 percent drop in sales between December and January. A decline in monthly sales volume during the winter months is an annual occurrence due to the seasonal nature of the New England housing market in which fewer homes are listed for sale, and harsh weather conditions as well as the holiday period lead to diminished buyer demand.
• The monthly median selling price for detached single-family homes increased for a fifth consecutive month in February, climbing 8.8 percent on an annual basis to $429,900. Its the largest percentage increase in median selling price on an annual basis since October 2012 when the median price rose 10.3 percent for the same month one year earlier, and marks the first time since July November 2010 that the single-family median home price has risen for five consecutive months. Strong buyer demand, a limited supply of homes for sale, and a decline in distressed property sales, have all contributed to the appreciation in home values over the past year. In particular, todays limited inventory levels is producing more multiple offer situations and thats elevating prices as evidenced by an increase of 3 percent over the past year in the ratio of original list price to selling price which rose from 91.2% last February to 94.1% in February 2013. On a month-to-month basis, the median selling price was essentially flat, slipping just $100 from Januarys median price of $430,000. Historically, Februarys median selling price is 20 percent below the all-time high monthly median price of $539,000 set in August 2005, but up nearly 23 percent from March 2009, when the median price bottomed out at $350,000 during the recession.
• The average list time for homes sold in February declined by more than three weeks (25 days) over the past 12 months to 109 days. This marks the twelfth consecutive month in which the average time to sell a single-family home has decreased on an annual basis in Greater Boston. Meanwhile, on a month-to-month basis, the average market time remained unchanged from January when the average time on the market also was 109 days. The average list time for single-family homes sold is at its highest point since April 2012 when homes sold in an average of 120 days, but it is likely that market time will diminish as buyer activity picks up with arrival of the spring housing market.
• Pending home sales rose on an annual basis for a twenty second consecutive month in February, climbing nearly 7 percent over the same month last year to 683 homes put under contract. On a month-to-month basis, pending sales increased even more, climbing 16.5 percent from January, and are now at their highest level since November when 787 homes went under agreement. As is the case with the monthly sales activity, the number of pending sales also is being hindered by low inventory levels, but should rebound in the coming months with advent of the spring market.
• The inventory of detached single-family homes for sale declined on an annual basis by 35.8 percent in February, marking the sixteenth time in the past 17 months that the number of homes on the market has declined from the same month one year earlier. There were approximately 1,450 fewer homes on the market this February compared to the same month last year, and with just 2,592 homes listed for sale last month its the first time since February 2004 that the inventory of single-family homes in Greater Boston has fallen below 3,000 listings. Todays tighter inventory level can be attributed to many homeowners being underwater on their mortgages and not in a position to sell, few new homes being constructed, and a reluctance among older, empty-nester households to put their homes up for sale until home values recover further. As a result, more buyers can expect to face competitive, multiple offer situations this spring.

The inventory of homes for sale as expressed in months of supply also fell steadilyin February. At the current sales pace, there was 6 months of supply last month, compared to 8.7 months in February 2012. A balaned market for buyers and sellers occurs when there is 7.5 8.5 monts of supply on the market. Although the supply level is now at its highest point in 10 months (dating back to April 2012 when there was a 6.8 month supply of homes for sale) due to the slower sales pace in February, the current market still modestly favors sellers. Its worth noting that this winters larger snowfall totals have hampered many homeowners from preparing their property for sale, but as warmer weather arrives with the advent of spring, industry practitioners are hopeful that more sellers will be enticed to put their home up for sale, which would provide more opportunities for buyers and, in general, a healthier housing market for all.

The Condominium Market:

• Condominium sales rose steadily in February to their highest level for the month in six years. A total of 425 condo units were sold in February 2013, an increase of 10.7 percent over the previous Februarys sales volume and the most since February 2007 when 601 units sold. This marks the fourteenth consecutive month in which condo sales have improved on an annual basis, with double-digit sales gains observed in each of those months. Empty-nesters, entry-level buyers, and investors are all helping to boost activity in the condo market. On a month-to-month basis, condo sales declined 16.8 percent from an upwardly revised 511 units sold in January. Of course, sales declines between the first two months of each year are quite common due to both the seasonal nature of the housing market in New England, and the fact that there are fewer days on the calendar for properties to close. Historically, this Februarys sales total ties for fourth best on record for the month in Greater Boston, equaling the number of units sold in February 2004, and exceeded only by February 2007 (601 units sold), February 2005 (572 units sold) and February 2006 (540 units sold).
• The condo median selling price declined for the first time in over a year in February, decreasing 5.2 percent over the past 12 months to $350,750. Its the first time since January 2012 that the median selling price has softened from the same month one year earlier, and the largest percentage drop in the monthly median price since November 2011 when the median price declined 7.3 percent. The decrease in median selling price does not suggest any substantial softening in buyer demand nor is it indicative of any long-term correction in market values, rather it reflects the fact that in three luxury properties valued at more than $5 million, including one priced over $10 million, were sold in February 2012 which artificially boosted the median price, but did not accurately reflect the larger market environment at the time. In fact, the market conditions that led to a steady rise in median selling prices in the 12 previous months remain in place, including a severely limited inventory of condos for sale, which remains down over 40 percent on an annual basis from the same month last year, and steady improvement in the ratio of original list price to sales price sellers are receiving for their units, which climbed 3 percent over the past 12 months from 93.4 percent in February 2012 to 96.8 percent this February a level not seen since the peak of the previous housing boom in 2005. Historically, Februarys median price is down 12.3 percent from the record median price of $400,000 set last June, but it is up 30 percent from 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.
• For the fourth consecutive month, the average time it took for condominiums to sell fell by one month or more, with days on the market down 30 days over the past year to an average of 93 days in February 2013. This data provides further evidence that buyer demand is continuing to outpace the supply of available inventory of condos for sale at the moment. Even though the average days on market for sold property in February is at its highest level since April 2012, this is due to the slower sales pace and drop in lighter foot traffic from buyers that traditionally occurs during the height of the winter season. Illustrative of this point, average market time rose on a month-to-month basis last month as well, climbing by five days from January when it took an average of 88 days for condominiums to sell.
• Pending sales of condominiums increased for the twenty-first time in the past 22 months, increasing 1.4 percent over the previous February to 644 units placed under contract in February 2013, which is the highest volume for pending sales in three months. On a month-to-month basis, pending sales also rose, improving 4 percent from January.
• The number of condos on the market declined for an nineteenth consecutive month in February, falling 41 percent from February 2012 to 1,915 condos for sale. While the number of listings is up modestly by 9 percent on a month-to-month basis, the current inventory level is lowest for the month of February in more than a decade. At the current sales pace there is a 4.5 month supply of condos available for sale, which is an improvement from January when there was a 3.4 month supply, but down sharply from one year ago when there was a 8.5 month supply in February 2012. The on-going shortage of listings is expected to put upward pressure on prices this spring and is preventing an even healthier rebound in sales activity from occurring, especially in suburb communities where fewer new units are being built.