August 2013 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes rose steadily in August to a new all-time high for the month, climbing 10.6 percent over the past year, from 1,300 homes sold in August 2012 to 1,438 during the same month this year. This is the busiest August for home sales in nine years, and eclipses the previous August sales record of 1,381 detached homes sold in August 2004 during the height of the last housing boom.

The strong sales growth in August 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 by having lost out in multiple offer situations have continued their home search beyond the traditional spring selling season. As a result, weve seen no measurable drop in buyer interest and stronger than normal sales activity throughout August.

On a month-to-month basis sales were down modestly by 4 percent from an upwardly revised 1,498 homes sold in July, but it should be noted that last months sales total also set a record high for July and is the fifth highest monthly sales total on record for any month in Greater Boston.

• The monthly median selling price for detached single-family homes increased for an eleventh consecutive month in August, climbing 6 percent on an annual basis to $520,000. This marks the first time since January November 2010 that the single-family median home selling price has risen for 11 consecutive months.

The steady increase in monthly median selling price over the better part of the past year 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 fourth consecutive month in August, a level that was approached only once in the past 10 years when it hit 97 percent in June 2004. As previously reported, a recent 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, which also has helped to lift the median selling price.

On a month-to-month basis, the median selling price did experience a small decline in August, decreasing 2.8 percent from an upwardly revised price of $534,900 the previous month, but it should be noted that Julys median selling price set a record high for the month in Greater Boston. Furthermore, from a historical perspective, this Augusts median price of $520,000 is the second highest on record for the month (topped only by a median price of $539,000 in August 2005) and eighth highest monthly median selling price ever recorded in Greater Boston. At its current level, the median selling price is up 48.6 percent from March 2009, when the median price bottomed out at $350,000 during the recession.

• The average list time for homes sold in August declined by more than one month (39 days) over the past year from 87 days in August 2012 to just 48 days this August. This remains close to a nine-year low for average market time to sell a home, which was set one month earlier when the average days on market dropped to 47 days in July 2013. This marks the eighteenth consecutive month in which the average time to sell a single-family home has decreased on an annual basis.
• Pending home sales rose on an annual basis for a twenty-eighth consecutive month in August, climbing 23 percent over the same month last year to 972 homes placed under contract. Although pending sales fell 6 percent on a month-to-month basis from a downwardly revised 1,034 pendig sales in July, this was the most active August in nine years, dating back to August 2004 when 1,000 homes were put under agreemet.
• The inventory of single-family home for sale remains well below historic norms, declining on an annual basis by 32 percent in August and by nearly 50 percent since August 2011. This marks the twenty-second time in the past 23 months that the number of homes on the market has dropped from the same month one year earlier, and with more than 1,200 fewer homes on the market this August compared to the same month in 2012, the 2,547 current listings of homes for sale is the lowest supply of homes for sale in the month of August in over a decade. On a month-to-month basis, the number of homes listed for sale also fell by 8.8 percent from an upwardly revised 2,792 homes on the market in July.

The inventory of homes for sale as expressed in months of supply also slipped from 2.9 months last August to 1.8 months in August 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:

• After falling unexpectedly by 4 percent in June, condo sales rose on an annual basis for a second consecutive month in August, climbing 5.2 percent over year ago levels to 1,267 units closed in August 2013. This is the busiest August for condominium sales in six years, and the fourth most active August for condo sales on record in Greater Boston, surpassed only by August 2005 (1,394 sales), August 2004 (1,360 sales), and August 2007 (1,294 sales). With last months sales gain, condo sales have now risen in 19 of the past 20 months on an annual basis dating back to January 2012.

Notably, condo sales also rose on a month-to-month basis in August, increasing 1.1 percent from an upwardly revised total of 1,253 condos sold in July.

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 sixth consecutive month, increasing 9.7 percent over the past year to $416,950 in August 2013. The median price is also up on a month-to-month basis by 3.8 percent from a downwardly revised median selling price of $401,600 in July.

Last months median sales price represents a new high monthly median price for the month of August, eclipsing the previous record price of $380,000 set just a year ago in August 2012. In addition, the median price this August is the second highest monthly median selling price ever recorded for any month in Greater Boston, exceeded only by the $420,000 median price recorded just two months earlier in June 2013.

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 99.7 percent in August. This marks the fourth consecutive month in which the listing price-to-selling price ratio for condos has stood at 99 percent, which beats the previous peak return of 98 percent of original list price achieved by home sellers in June 2005 during the previous decades housing boom.

Historically, Augusts median selling price is up 54.4 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 tenth consecutive month the average time it took for condominiums to sell fell by one month or more, with days on the market down 36 days over the past year to an average of 40 days in August 2013. Although the average market time is up slightly from 38 days in July, it remains extremely low by historic standards offering further evidence 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 than during the summer of 2013 was 11 years ago in July 2002 when the average market time was 37 days.
• Pending sales of condominiums increased for the twenty-seventh time in the past 28 months, increasing 12 percent over the previous August to 823 units placed under contract in August 2013. On a month-to-month basis the number condos put under agreement fell 16 percent in August from a downwardly revised 982 pending sales in July, making it the lowest monthly total for condo pending sales since February. However, it is worth noting that the 823 condos that went under contract last month is the most for any August in eight years (August 2005 when approximately 900 condos were put under agreement), which suggests that buyer demand remains strong on a historical basis so sales activity should remain healthy well into the fourth quarter.
• The number of condos on the market declined for a twenty-fifth consecutive month in August, decreasing by almost 38 percent from August 2012 to 1,580 condos for sale. On a month-to-month basis, the number of condo listings also fell, declining 13.4 percent from July. The current inventory of condos for sale is the lowest monthly listing total in more than a decade, having dropped to a level that is even lower than what is typical during the holiday period and winter months from December - February. At the current sales pace there is a 1.2 month supply of condos available for sale, which is a decline from July when there was a 1.5 month supply, and also down steadily from last year when there was a 2.1 month supply in August 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.