Greater Boston Real Estate Market Trends, May 2013

The Single-Family Home Market:

• Sales of single-family homes improved on an annual basis for a second consecutive month in May, climbing 10 percent, or more than 100 units from the same month last year, to set a new record high for the month. Last months sales total of 1,105 homes sold eclipses the previous high for the month set nearly a decade ago when 1,069 single-family homes sold in May 2004. In addition, the May 2013 sales volume is the highest monthly sales total since last August, when 1,300 detached single-family homes sold.

Strong gains on Wall Street during the first quarter of the year, along with steady job growth in the local economy, and a half-year of rising home prices have all helped to boost buyer demand this spring. In addition, limited inventory levels and a small uptick in mortgage rates have created a sense of urgency among prospective home buyers that has further contributed to the record-setting sales pace in May.

• On a month-to-month basis detached single-family home sales rose even more sharply in May, increasing 42.2 percent from an upwardly revised 777 detached home sales in April. Last months sales gain exceeds the 35.5 percent increase in month-to-month sales between April and May 2012, due in part to this years slower start to the spring market. Of course, the healthier sales pace over the past month is not a surprise given the cyclical nature of the housing market in New England. Still it is noteworthy given the sharply lower inventory level of homes for sale in this years spring market.
• The monthly median selling price for detached single-family homes increased for an eighth consecutive month in May, climbing 7 1/2 percent on an annual basis to $499,900. This marks the first time since April November 2010 that the single-family median home selling price has risen for eight consecutive months.

Notably, the median selling price for detached single-family homes is now at its highest level in 10 months, dating back to July 2012 when the median price hit $510,000. The steady increase in median selling price over the past 12 months, along with measurable appreciation in home values for two-thirds of a year, can be attributed to several factors, including a decline in sales of lower-priced distressed properties (i.e. foreclosed homes and short-sales); a diminished supply of homes for sale which is increasingly producing competitive multiple offer situations that help to drive up home prices; and a steady increase in sales of homes priced at or above $1 million, which rose by one-quarter (24.8%) over the past year (from 117 in May 2012 to 146 in May 2013).

On a month-to-month basis the median selling price also increased, but by a slightly more modest 5.2 percent from $475 in April. Historically, May median selling price is 7.3 percent below the all-time high monthly median price of $539,000 set in August 2005, but up 42.8 percent from March 2009, when the median price bottomed out at $350,000 during the recession.

• The average list time for homes sold in May declined by over three weeks (22 days) over the past 12 months to 74 days, the shortest list time in nearly eight years that it has taken detached homes to sell. The last time it took less time for single-family homes to sell in Greater Boston was in September 2005 when the average days on the market fell to 72 days. This marks the fifteenth consecutive month in which the average time to sell a single-family home has decreased on an annual basis. On a month-to-month basis, market time also dropped steadily from an average of 94 days in April.
• Pending home sales data is unavailable this month due to a modification in MLS-PIN rules that took effect last month which revised the methodology for calculating pending sales. This change prevented an accurate apples-to-apples comparison with data for May 2012 regarding the number of homes placed under agreement. Efforts are being made to resolve discrepancies, and we hope to have data on pending sales activity for May available with next months report.
• The inventory of detached single-family homes for sale declined on an annual basis by nearly 45 percent in May, marking the nineteent time in the past 20 months that the number of homes on the market has declined from the same month one year earlier. There were nearly 2,300 fewer homes on the market tis May compared to the same mnth in 2012. Furthermore, with just 2,836 homes for sale its the fewest number of detached single-family homes for sale in the month of May in over a decade. The number of homes listed for sale also decreased from the previous month, slipping nearly 10 percent from April when there were over 3,100 single-family homes on the market.

Similarly, the inventory of homes for sale as expressed in months of supply also fell sharply in May. At the current sales pace, there was 2.6 months of supply last month, compared to 5.1 months in May 2012. A balanced market occurs when there is 7.5 8.5 months of supply on the market. 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, at the current sales pace there is an insufficient supply of homes to meet demand, which is a significant concern for the local housing market as it has the potential to produce rapid appreciation in home values. This will likely frustrate some buyers who lose out in competitive, multiple offer situations, and, worse, could price other buyers out-of-the-market.

The Condominium Market:

• Condominium sales rose in May for a seventeenth consecutive month on annual basis, increasing modestly by 4 percent from the same month one year ago. A total of 1,052 condo units were sold in May 2013, which is the highest sales volume for the month in six years dating back to 2007 when a May record of 1,195 condos were sold. Last months sales total is the fourth highest sales total on record for the month of May in Greater Boston, surpassed only by May 2007 (1,195), May 2005 (1,151), and May 2006 (1,111).

On a month-to-month basis, sales of condominium also rose in May, climbing 30 percent from an upwardly revised 807 units sold in April.

Demand for condos remains strong, especially among suburban empty-nesters looking to purchase in Boston, as well as with investors, and renters looking to become first-time homeowners, but a shortage of condominiums for sale has resulted in fewer opportunities to buy and put upward pressure on prices which is holding back even healthier activity.

• The median selling price for condominiums rose steadily over the past 12 months by 7.6 percent to a new all-time high monthly median price of $410,000 in May 2013. Its the second time in the last three months that the median selling price for condos has reached a new high point, with the most recent record set in March when the median selling price climbed to $405,500. The condo median selling price has increased in each of the past three months, following a 5.2 percent decline in February, which was just the second drop in the monthly median price in the previous five quarters.

With buyer demand soaring and inventory extremely limited, sellers are benefitting. This is evident from the ratio of original list price to sales price property owners are receiving for their units, which improved steadily over the past 12 months to a record high 99.4 percent in May. This tops the previous peak return of 98 percent of original list price observed during the height of the last housing boom in June 2005.

Historically, the new record high median price of $410,000 set this May is 1.1 percent above the previous record median price of $405,500 set this past March, and is up nearly 52 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 seventh consecutive month the average time it took for condominiums to sell fell by one month or more, with days on the market down 35 days over the past year to an average of 51 days in May 2013. The average market time also declined on a month-to-month basis last month, decreasing by nearly two weeks (12 days) from April when it took an average of 63 days for condominiums to sell. This data offers further evidence that buyer demand is continuing to outpace the supply of available inventory of condos for sale at the moment. The last time it took less time to sell a condo was July 2004 when the average market time was 48 days.
• Pending home sales data is unavailable this month due to a modification in MLS-PIN rules that took effect last month which revised the methodology for calculating pending sales. This change prevented an accurate apples-to-apples comparison with data for May 2012 regarding the number of homes placed under agreement. Efforts are being made to resolve discrepancies, and we hope to have data on pending sales activity for May available with next months report.
• The number of condos on the market declined for a twenty-second consecutive month in May, decreasing by 47 1/2 percent from May 2012 to just 1,925 condos for sale. Similar to the single-family home market, listings of condos for sale also declined 19 percent from the previous month, a sharp drop that is rare between April and May as inventory typically rises steadily on a month-to-month basis from February June when the spring home buying season kicks in. The current inventory of condos for sale is more typical for the winter months of December February, and marks the lowest active listing total for the month of April in nine years dating back to April 2004 when approximately 2,950 condos were listed for sale. At the current sales pace there is a 1.8 month supply of condos available for sale, which is a decline from April when there was a 2.9 month supply, and also down steadily from last year when there was a 3.6 month supply in May 2012. The on-going shortage of listings will continue to keep upward pressure on prices and is preventing an even healthier rebound in sales activity from occurring, especially in suburb communities where fewer new units are being built.