June 2013 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• After steady gains in each of the two previous months, sales of single-family homes cooled from year ago levels in the final month of the second quarter, declining by about 3 percent in June compared to the same month in 2012. A limited inventory of homes for sale, which has hampered the market for much of the past year, along with higher home prices and mortgage rates have restrained sales activity over the final month of the spring quarter as some buyers grow discouraged and other first-time buyers get priced out-of-the-market.

Notably, however, despite the slightly slower sales pace this June, buyer demand remained historically strong with the 1,468 detached homes sold ranking fifth best for sales volume for the month, topped only by June 2004 (1,606 homes sold), June 1999 (1,536 sales), June 2005 (1,523 sales) and June 2012 (1,511 sales). Overall during the second quarter, single-family home sales improved 3 percent in the three months from April - June 2013 as compared to the same quarter one year ago.

• On a month-to-month basis detached single-family home sales increased steadily in June, climbing 31.7
  percent from an upwardly revised 1,115 detached home sales recorded in May. Of course, sales activity was expected to improve over the past month as buyer demand typically strengthens over the course of the spring selling season due to
  the cyclical nature of the New England housing market. That said, the healthy jump in sales from May is noteworthy given the sharply lower inventory level of homes for sale in this years spring market compared to the same period last year.
• The monthly median selling price for detached single-family homes increased for an ninth consecutive month in June, climbing nearly 8 percent on an annual basis to a new all-time monthly high of $541,500. The previous record high median price for any given month occurred during the housing boom of the last decade when the median price rose to $539,000 in August 2005. This marks the first time since March November 2010 that the single-family median home selling price has risen for nine consecutive months.

The steady increase in median selling price over the past 12 months to a new record high is a measure of the overall health of the local housing market, and reflects todays strong consumer confidence in the general economy as well as years of pend-up demand which have led to strong buyer activity this spring and a diminished inventory of homes for sale that is putting upward pressure on home prices. Specifically, with fewer homes available for sale the number of multiple offer situations is on the rise and that is helping to drive up home prices. Additionally, a decline in the number of lower-priced distressed properties (i.e. foreclosed homes and short-sales) due to an improving economy means a smaller percentage of homes selling at discounted pricing, and that too has helped to lift the monthly median selling price of late.

On a month-to-month basis the median selling price rose as well, increasing 8.3 percent from $499,900 in May. Historically, the June median selling price reflects a 0.5 percent increase over the previous monthly high median price of $539,000 set in August 2005, and 54.7 percent jump from March 2009, when the median price bottomed out at $350,000 during the recession.

• The average list time for homes sold in June declined by more than one month (34 days) over the past 12
  months to 56 days, the shortest list time in 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 July 2005 when the average days on the market fell to 55 days. This marks the sixteenth 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 75 days in May.
• Pending home sales rose on an annual basis for a twenty-sixth consecutive month i June, climbing nearly 15.5 percent over the same month last year to 1,377 homes placed under contract. Although pending sales fell 11.5 percent on a mont-to-month basis from record high of 1,556 pending sales in May, the 1,377 homes placed under agreement last month is a record for the month of June in Greater Boston.
• The inventory of detached single-family homes for sale remains well below year ago levels, declining on an annual basis by 35 percent in June. This marks the twentieth time in the past 21 months that the number of homes on the market has dropped from the same month one year earlier, and 11 consecutive months in which the inventory of homes for sale has decreased 30 percent or more from the comparable month the previous year. There were over 1,500 fewer homes on the market this June compared to the same month in 2012, and with just 2,786 homes for sale its the fewest number of detached single-family homes for sale in the month of June in over a decade. On a month-to-month basis, the
  number of homes listed for sale also fell modestly by 5.7 percent from 2,955 homes on the market in May.

The inventory of homes for sale as expressed in months of supply also slipped from 2.9 months last June to 1.9 months in June 2013. 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 list their homes for sale until home values recover further. A balanced market occurs when there is 7.5 8.5 months of supply. As a result, at the current sales pace there is an insufficient supply of homes to meet demand, which is a significant concern since it has the potential to produce rapid appreciation in home values. This will frustrate buyers who lose out in competitive, multiple offer situations, and, worse, could price other buyers out-of-the-market.

The Condominium Market:

• Condominium sales declined on annual basis for the first time in 18 months in June, sliding 4 percent, or a total of 50 units, over the past 12 months to 1,214 units closed in June 2013. The last time condo sales fell from the same month one year earlier was December 2011, when they declined 3.4 percent from the previous December. Despite the
  modest decrease in activity from year ago levels, last month was the busiest for condo sales in 10 months, dating back to August 2013 when 1,204 condominiums were sold. In addition, from a historical perspective, last months sales total is
  the seventh highest sales total on record for the month of June in Greater Boston, surpassed only by June 2005 (1,465 sales), June 2007 (1,328), June 2004 (1,293), June 2012 (1,264), June 2006 (1,240), and June 2010 (1,238).

On a month-to-month basis, sales of condominium also rose in June, climbing nearly 14 percent from an upwardly revised 1,066 units sold in May. And during this years spring quarter, sales improved 1.6 percent from 3,034 condos sold during the second quarter of 2012 to 3,084 in the three months of April June 2013.

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. However a shortage of condos for sale is constraining sales activity and creating upward pressure on prices as buyers compete for a limited supply of listings.

• The median selling price for condominiums rose steadily on an annual basis for a fourth consecutive month, increasing 5.5 percent over the past year to a new all-time high monthly median price of $422,000 in June 2013. Its the third time in the last four months that the median selling price for condos has reached a new high point, with last months median price up nearly 3 percent from the previous monthly record price of $410,000 set just one month earlier in May.

With buyer demand steady 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 99.7 percent in June. This figure mirrors the 99.4 percent list price-to-selling price ratio earned during May of this year, and surpasses the previous peak return of 98 percent of original list price observed in June 2005 during the housing boom of the previous decade.

Historically, the Junes record high median price of $422,000 is up 56.3 percent from the lowest median selling price reported during the last market correction which occurred in January 2009 when the monthly median price bottomed out at $270,000.

• For the eighth consecutive month the average time it took for condominiums to sell fell by one month or more, with days on the market down 33 days over the past year to an average of 42 days in June 2013. The average market time also declined on a month-to-month basis last month, decreasing by more than one week (9 days) from May when it took an average of 51 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 only other time in the past decade that the average listing time has dropped below 50 days was July 2004 when the average market time was 48 days.
• Pending sales of condominiums increased for the twenty-fifth time in the past 26 months, increasing 15.7 percent over the previous June to 1,158 units placed under contract in June 2013. Mirroring the detached single-family home market, the number condos put under agreement fell 11.9 percent in June on a month-to-month basis from 1,314 pending sales in May, but it is worth noting that the 1,158 homes that went under contract last month is the most for any June since the last housing boom when more than 1,300 pending sales were reported in June 2005.
• The number of condos on the market declined for a twenty-third consecutive month in May, decreasing by 40 percent from June 2012 to approximately 1,850 condos for sale. On a month-to-month basis, the number of condo listings also dropped, declining 8 percent from May. This development will only serve to exacerbate the inventory shortage in the condominium market which typically experiences a steady rise for sale inventory on a month-to-month basis from February June as 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 June in more than a decade. At the current sales pace there is a 1.5 month supply of condos available for sale, which is a decline from May when there was a 1.9 month supply, and also down steadily from last year when there was a 2.4 month supply in June 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.