October 2013 Greater Boston Real Estate Market Trends Report

The healthy sales pace in October reflects improved consumer confidence in the housing market which is being fueled largely by rising home values. In addition, concerns over higher interest rates and inventory shortages among buyers kept the market more active than normal this summer, and demand from those who were outbid on homes during the traditional spring market has resulted in many buyers extending their home search beyond the start of the school year.

This prolonged period of rising home prices not seen since the housing boom in the middle of the last decade reflects increased optimism in housing and a stronger desire for home ownership, which is being fueled by rising home values, steady job growth, and record high rents in metropolitan Boston. This latest data also offers further evidence that trade-up activity, which is most often comprised of households with school aged children, has been especially strong in recent months, and also demonstrates the upward pressure being put on home prices as buyers compete for a limited supply of homes for sale. In fact, sales of homes priced between $400,000 and $799,999 have risen by nearly one-third (32%) in the past 12 months from 274 in October 2012 to 361 this October. At the same time, sales of lower-priced distressed properties (i.e. foreclosed homes and short-sales) continue to declining, with homes priced under $200,000 tumbling by more than half (52%) in the past year, from 50 homes last October to 24 in October 2013.

On a month-to-month basis, the median price moderated in October, sliding 7 percent from a downwardly revised $500,500 in September. Notably, however, last months median selling price was a record high for September in Greater Boston. At present, the median selling price remains up 33 percent from March 2009, when values bottomed out at $350,000 during the recession.

However, of little surprise, market activity slowed on a month-to-month basis in October, with sales dropping 16 percent from an upwardly revised 887 condos sold in September.

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.

As was the case in the detached single-family home market, last months median sales price represents a new high monthly median price for the month of October, surpassing the previous record price of nearly $366,000 set just a year ago in October 2012. In addition, the median price this October ranks as the third highest monthly median selling price ever recorded for any month in Greater Boston, exceeded only by the record high median of $420,000 set in June of this year, and the $416,250 median price recorded this past August.

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 95.8 percent last October to 99 percent in October 2013. This marks the sixth 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.

Unusual for this time of year, the median price also improved on a month-to-month basis, appreciating 1.6 percent from September when the median price reached $410,000. As of last month, the median selling price is up 54.3 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.