July 2013 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• After a modest decline the previous month, sales of detached single-family homes rebounded sharply in July, increasing by 16 percent (or over 200 units) on an annual basis to reach an new record high sales volume for the month. A total of 1,485 single-family homes were sold in July 2013, up from 1,279 in July 2012, and a nine-year high for the month which tops the previous July sales record of 1,473 closed transactions set in July 2004.

The strong sales growth in July over year ago levels is due in part to the rise in mortgage rates this spring, which has provided a strong incentive for buyers to act before interest rates climb further. In addition, buyer demand has remained steady throughout this summer (more so than in recent years), as those frustrated on having lost out in multiple offer situations have continued their home search beyond the traditional spring selling. As a result, weve seen no measurable drop in buyer interest and stronger than normal sales activity this July.

In fact, sales on a month-to-month basis were virtually unchanged, slipping by just a half dozen units or 0.4 percent from an upwardly revised 1,491 homes closed in June.

• The monthly median selling price for detached single-family homes increased for a tenth consecutive month in July, climbing nearly 4 1/2 percent on an annual basis to $533,000. This marks the first time since February November 2010 that the single-family median home selling price has risen for 10 consecutive months.

The steady increase in monthly median selling price over the past three-plus quarters reflects todays strong consumer confidence in the local housing market and economy, as well as years of pent-up demand which have led to strong buyer activity and a diminished inventory of homes for sale that is putting upward pressure on home prices. In fact, the percent of original list price to sale price that sellers are receiving remained at 98 percent for a third consecutive month in July, a level that was approached only once in the past 10 years when it hit 97 percent in June 2004. Notably, a decline in sales of lower-priced distressed properties (i.e. foreclosed homes and short-sales) 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 did ease slightly, decreasing 1.6 percent from June when the monthly median selling price rose to a record high of $542,000 (upwardly revised from $541,500 when first reported last month). Nonetheless, from a historical perspective, last months median selling price of $533,000 represents a new all-time high monthly median price for July, surpassing the previous high of $528,125 set in July 2007, and reflects a 52.3 percent gain from March 2009, when the median price bottomed out at $350,000 during the recession.

• The average list time for homes sold in July declined by more than one month (33 days) over the past 12 months to 47 days. This marks the shortest list time in nine years that it has taken single-family homes to sell, dating back to July 2004 when it took an average of 48 days for detached single-family homes in Greater Boston to sell. This marks the seventeenth 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 56 days in June.
• Pending home sales rose on an annual basis for a twenty-seventh consecutive month in July, climbing 12.2 percent over the same month last year to 1,068 homes placed under contract. Although pending sales fell 19 percent on a month-to-month basis from a revised 1,328 pending sales in June, this was the most active July since 2004 for putting homes under agreement.
• The inventory of single-family homes for sale remains well below year ago levels, declining on an annual basis by 34 percent in July. This marks the twenty-first time in the past 22 months that the number of homes on the market has dropped from the same month one year earlier, and 12 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 nearly 1,400 fewer homes on the market this July comparedto the same month in 2012, and with just 2,615 homes for sale its the fewest number of detached single-family homes for sale in the month of July in over a decade. On a month-to-month basis, the number of homs listed for sale also fell steadily by 10.7 percent from an upwardly revised 2,929 homes on the market in June.

The inventory of homes for sale as expressed in months of supply also slipped from 3.1 months last July to 1.8 months in July 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:

• Following a modest 4 percent decrease in condo sales in June, which marked the first annual decline in condo market activity in 18 months, sales volume surged in July, climbing 18.6 percent over the past 12 months to 1,236 units closed in July 2013. Its the largest percentage increase in monthly condo sales on an annual basis since January, when sales rose 22 percent from January 2012. In addition, from a historical perspective, last months sales total is the second best sales total on record for the month of July in Greater Boston, surpassed only by July 2005 when 1,269 condos sold.

As was the case in the detached single-family home market, sales of condominium remained essentially stable on a month-to-month basis in July, slipping just 0.6 percent, or seven units, from June.

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 fifth consecutive month, increasing 4 percent over the past year to $402,600 in July 2013. Last months median sales price represents a new all-time high monthly median price for the month of July, eclipsing the previously record price of $387,000 set just a year ago in July 2012.

With buyer demand steady and inventory extremely low, 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 new record high of 99.9 percent in July. This figure mirrors the 99.7 percent list price-to-selling price ratio earned during June and 99.4 percent list price-to-selling price ratio observed in May of this year, and also tops the previous peak return of 98 percent of original list price achieved in June 2005 during last decades housing boom.

Although the condo median selling price did decline on a month-to-month basis, dipping a modest 4 percent in July from a downwardly revised median price of $420,000 the previous month, its worth noting that the June 2013 median price of $420,000 set a record as the highest monthly median selling price for condominiums in Greater Boston.

Historically, the current monthly median price of $402,600 is up 49 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 ninth 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 38 days in July 2013. The average market time also declined on a month-to-month basis last month, decreasing by 5 days from June. This data supports the notion that buyer demand continues to outpace the supply of available inventory of condos for sale. The last time it took less time for condominiums to sell was 11 years ago in July 2002 when the average market time was 37 days.
• Pending sales of condominiums increased for the twenty-sixth time in the past 27 months, increasing 24.5 percent over the previous July to 1,006 units placed under contract in July 2013. On a month-to-month basis the number condos put under agreement fell 9.9 percent in July from a downwardly revised 1,116 pending sales in June, making it the lowest monthly total for condo pending sales since February. However, it is worth noting that the 1,006 condos that went under contract last month is the most for any July during the past decade, which suggests that buyer demand is not softening and sales activity should remain healthy through the third quarter.
• The number of condos on the market declined for a twenty-fourth consecutive month in July, decreasing by 40 percent from July 2012 to approximately 1,700 condos for sale. On a month-to-month basis, the number of condo listings also dropped, declining nearly 20 percent from June. The current inventory of condos for sale is the lowest its been in six months, and is more typical for the winter months of December February. For example, there were 1,670 condos for sale in January 2013 and 1,614 condos for sale in December 2012). Additionally, this is the lowest active listing total for the month of July in more than a decade. At the current sales pace there is a 1.4 month supply of condos available for sale, which is a decline from May when there was a 1.6 month supply, and also down steadily from last year when there was a 2.7 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.