September 2013 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes rose on an annual basis for a third consecutive month in September, increasing 21 percent, from 766 homes sold in September 2012 to 927 in the same month this year. Its the most active September for single-family home sales in eight years, matching September 1999 for the fifth busiest September on record in Greater Boston. Only September 2004 (983 homes sold), September 2005 (960), September 1997 (947) and September 2003 (946) experienced higher sales volume. Additionally, the growth in September sales activity is the largest in 10 months, dating back to November 2012 when sales improved 31.7 percent from the comparable month one year earlier.

The strong sales growth in September can be attributed to a more motivated home buying public, as concerns about higher home prices, rising interest rates, and an increasingly tight supply of homes for sale have created added anxiety for home shoppers and driven up demand as many look to buy for fear of being priced out of the current market.

Overall, during the third quarter, single-family home sales improved 15.8 percent in the three months from July - September 2013 as compared to the same quarter one year ago, climbing from 3,345 homes sold in the 2012 third quarter to 3,873 in the same three month period this year.

• On a month-to-month basis detached single-family home sales fell 36 percent in September from an upwardly revised 1,448 homes sold in August. While this decline is not unexpected given the seasonality of local housing markets in New England, the magnitude of the decrease is the largest in 12 months (September 2012) when sales declined 42 percent from the previous month, and reflects the fact that September 2013 sales activity is being compared to an August sales volume total that was the fifth highest on record for any month in Greater Boston.
• The monthly median selling price for detached single-family homes increased for a twelfth consecutive month in September, improving 16.4 percent on an annual basis to $501,000. Its the largest percentage increase in the monthly median selling price on an annual basis in nearly four years, dating back to December 2009 when the median price jumped 19.6 percent from the same month the previous year. This marks the first time since December 2009 November 2010 that the single-family median home selling price has risen for 12 consecutive months. For the summer quarter, the median selling price rose 7.4 percent from $484,000 from July September 2012 to $520,000 in the 2013 third quarter.

The spike in the monthly median selling price over the past year reflects increased confidence in housing and a stronger desire for home ownership that is being fueled by rising home values, steady job growth, and record high rents in metropolitan Boston. Additionally, strong sales gains in the luxury home market (where sales of homes priced at or above $1 million have risen 46% from 125 in September 2012 to 183 in September 2013), along with a steady decline in sales of lower-priced distressed properties (i.e. foreclosed homes and short-sales), and todays severely limited supply of homes for sales which is triggering multiple offer situations and more sales above asking price, have all helped to lift the median selling price during the past year.

On a month-to-month basis, the median price experienced a modest decline in September, slipping 3.7 percent from $520,000 the prior month, but thats down from an August median selling price that was the second highest on record for the month in Greater Boston. In addition, its worth noting that this Septembers median home price of $501,000 is the highest ever recorded for the month, eclipsing the previous record of $485,000 set inSeptember 2005. At present, the median selling price remains up 43 percent from March 2009, when values bottomed out at $350,000 during therecession.

• The average list time for homes sold declined by a full month (31 days) over the last year from 89 days in September 2012 to 58 days this September. Its the nineteenth consecutive month that the average time to sell a single-family home has fallen on an annual basis. While average market time rose by over a week from an upwardly revised 49 days in August, days on market in September remains well below the 82 day average observed over the past 12 months.
• Pending home sales rose on an annual basis for a twenty-ninth consecutive month in September, increasing 4 percent over the same month last year to 910 homes placed under contract. Although pending sales declined 3 percent on a month-to-month basis from a downwardly revised 938 pending sales in August, this was the most active September in nine years, dating back to September 2004 when close to 950 homes were put under agreement.
• The inventory of single-family homes for sale remains well below historic norms, declining on an annual basis by more than one-quarter (28%) in September and by almost one-half (47%) in the past 24 months. Its the twenty-third time in the past 24 months the number of homes listed for sale has dropped from the same month one year earlier, and with over 1,125 fewer homes on the market this September compared to the same month in 2012, the 2,802 listings as of September 30 represents the lowest September supply of homes for sale in over a decade. On a month-to-month basis, the number listings did climb modestly by 3.7 percent from an upwardly revised 2,701 homes on the market in August.

The inventory of homes for sale as expressed in months of supply also slipped from 5.1 months last September to 3 months in September 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. Thus, 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 unexpectedly sliding 4 percent in June, condo sales have now risen on an annual basis for three consecutive months, improving 17.5 percent over year ago levels to 885 units closed in September 2013. Similar to the detached single-family home market, this was the busiest September for condominium sales in eight years, and the third most active September for condo sales on record in Greater Boston, surpassed only by September 2005 (945 sales) and September 2004 (896 sales). With last months sales gain, condo sales have now risen in 20 of the past 21 months on an annual basis dating back to January 2012. Furthermore, during the just concluded summer quarter, sales improved 14 percent from 2,999 condos sold during the third quarter of 2012 to 3,419 in the three months from July September 2013.

However, of little surprise, condo sales did moderate considerable on a month-to-month basis in September, declining 30.6 percent from an upwardly revised 1,276 condos sold in August.

Still, demand for condos remains strong, especially among suburban empty-nesters looking to relocate to 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 seventh consecutive month, increasing 9.3 percent over the past year to $410,000 in September 2013. This follows an equally healthy price appreciation rate of 9.7 percent in August, which was the largest percentage increase in the condo monthly median price since March of this year, when the median selling price climbed 19.7 percent from the same month in 2012. Over the course of the entire summer, the median selling price rose 7.3 percent, from $382,000 in the third quarter of 2012 to $409,900 in the three-month period from July September 2013.

Last months median sales price represents a new high monthly median price for the month of September, surpassing the previous record price of $375,000 set just a year ago in September 2012. In addition, the median price this September ranks as the third highest monthly median selling price ever recorded for any month in Greater Boston. It ties with the May 2013 median price of $410,000 for third best, and is topped only by the June 2013 median price of $420,000 and August 2013 median of $416,000.

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 from 96.4 percent last September to 99 percent in September 2013. This marks the fifth consecutive month in which the listing price-to-selling price ratio for condos stands 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.

The median price did soften slightly on a month-to-month basis, slipping 1.4 percent from a downwardly revised median selling price of $416,000 in August. Historically, however, Augusts median selling price is up 52 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 eleventh 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 50 days this September. Although the average market time has increased by more than one week (7 days) from 40 days in August, 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 the 2013 third quarter average market time of 43 days was 11 years ago in July 2002 when the average market time was meager 37 days.
• The number of condominiums put under agreement increased for the twenty-eighth time in the past 29 months, increasing 12.5 percent over the previous September to 836 units placed under contract in September 2013. Pending sales also rose on a month-to-month basis, climbing 6 percent in September from a downwardly revised 788 pending sales in August. Notably, this is the only time in the past decade that 800 or more condos have been placed under contract in the month of September, which offers compelling evidence that buyer demand remains strong on a historical basis so sales activity should remain healthy for much, if not all, of the fourth quarter.
• The number of condos on the market declined for a twenty-sixth consecutive month in September, declining by 30 percent (or nearly 800 units) over the past 12 months to 1,841 condos for sale, and tumbling 56 percent (or more than 2,300 units) from September 2011. Like the single-family market, the current inventory of condos for ale 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 2.1 month supply of condos available for sale, which is down steadily from last year when there was a 3.5 month supply in September 2012. Notwithstanding a modest 7 percent increase in the number of condo listings from August, as we enter the final quarter of the year, its clear that the on-going shortage of listings continues to put upward pressure on prices and is preventing an even healthier rebound in sales activity from occurring, especially in suburb communities where few new units are being built.