November 2013 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes fell for the first time in five months during November, declining 12 percent over the past 12 months from a robust 902 home sold last November to 793 in November 2013. Its just the fourth time this year sales volume has declined on an annual basis, and is the largest decrease on a year-to-year basis since sales dropped 13.2 percent in June 2011 from the same month one year earlier.

Additionally, on a month-to-month basis detached single-family home sales declined 8.2 percent in November from an upwardly revised 864 homes sold in October.

The drop in sales can be attributed to a softening in buyer demand associated with the uptick in mortgage rates this fall, as well as anxiety among consumers caused by the federal government shutdown which led some buyers to retreat from the market. Despite the decrease in sales activity, last months sales total is the tied for the ninth highest on record (with November 2005) in Greater Boston for the month of November.

• The monthly median selling price for detached single-family homes increased for a fourteenth consecutive month, improving 6.4 percent on an annual basis to $475,000. Its the first time since November 2004 December 2005 that the single-family median home selling price has risen for such an extended period. Notably, last months median selling price equals the highest on record for November, matching the median price for homes sold in November 2005.

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, which is being fueled by rising home values, steady job growth, and record high rents in metropolitan Boston. The latest data also demonstrates the upward pressure being put on home prices as buyers compete for a limited supply of homes for sale. In fact, November marks the ninth consecutive month in which the ratio of original listing price to sales price received by sellers has been at or above 95 percent. As previously reported, the steady decline in sales of lower-priced distressed properties (i.e. foreclosed homes and short-sales) also has helped to lift the median selling price lately since fewer homes are being sold at discounted pricing.

On a month-to-month basis, the median price also rose modestly by 1.7 percent from an upwardly revised $467,000 in October, which is notable since that represents a new record high median price for the month of October in Greater Boston. At present, the median price of $475,000 in November has rebounded 35.7 percent from March 2009, when values bottomed out at $350,000 during the recession.

• The average list time for homes sold declined by more than three weeks (24 days) during the past year from 89 days in November 2012 to 65 days this November. Its the twenty-first consecutive month that the average time to sell a single-family home has fallen on an annual basis. While average market time increased from 60 days in October, the time on market for homes sold in November remains below the 75 day average observed over the first 11 months of this year.
• Pending home sales rose on an annual basis for a fourteenth consecutive month in November, increasing nearly 8 percent over the same month last year to 740 homes placed under contract, making it the busiest November for homes to be put under agreement since 2006. On a month-to-month basis, pending sales declined 23.6 percent from October and are now at their lowest level since February 2012 when 713 homes went put under contract. This decrease is not unexpected however, given that sales activity typically declines during the traditional holiday period and clder weather months of November February, especially in New England.
• The inventory of single-family homes for sale remais well below historic norms, decliningon an annual basis by almost 30 percent in November and by almost one-half (49%) in the past 24 months. Its the twenty-fifth time in the past 26 months the number of homes listed for sale has dropped from the same month one year earlier, and with 900 fewer homes on the market this November compared to the same month in 2012, the 2,132 listings as of November 30 represents the lowest November supply of homes for sale in over a decade. On a month-to-month basis, the number listings also fell 21 percent from an upwardly revised 2,727 homes on the market in October.

The inventory of homes for sale as expressed in months of supply also declined from 3.4 months last November to 2.7 months in November 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 steady 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:

• Similar to the single-family home market, condo sales declined in November for the first time since June, slipping 7.4 percent over year ago levels to 701 units closed in November 2013. Its just the second time since January 2012 that condo sales decreased on an annual basis, and represents the largest percentage drop in sales volume on a year-to-year basis since June 2011 when sales fell 15.1 percent from the same month the previous year.

Sales activity also decreased on a month-to-month basis by a slight greater amount, sliding 8 percent from an upwardly revised 762 condos sold in October.

Nonetheless, 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. In fact, in spite of the drop in sales volume last month, it was the fourth most active November on record for condo sales, topped only by November 2009 (818 sales), November 2004 (761 sales), November 2012 (757 sales).

• The median selling price for condominiums increased on an annual basis for a ninth consecutive month in November, improving nearly 8 percent over the past year to $410,000. The last time the median price rose on a year-to-year basis was April 2012 January 2013. In fact, the median selling price for condos has only declined twice on an annual basis during the past two years, in January 2012 when it slipped 1.4 percent and February 2013 went it slid 5.2 percent from the comparable month a year earlier.

Notably, last months median selling price establishes a new record for the month of November, eclipsing the previous peak price set a year ago when the median price was $380,000 in November 2012. Novembers median price also ranks as the fourth highest monthly median selling price ever recorded for any month in Greater Boston, matching the median price for homes sold in both May and September 2013, and exceeded only by the record high median of $420,000 set this past June, the $416,750 median price recorded in October of this year, and the $415,000 price observed in August 2013.

With buyer demand still healthy 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 96.2 percent last November to 98.8 percent in November 2013. This marks the eighth consecutive month in which the listing price-to-selling price ratio for condos has hit 98 percent or higher, a level not seen since June 2005 during the housing boom of the last decade.

As of last month, the median selling price remains up 52 percent from the lowest median selling price reported in the last market correction which occurred in January 2009 when the monthly median price bottomed out at $270,000.

• The average time for condominiums to sell has declined steadily over the past 12 months by nearly four weeks, from an average of 77 days on the market in November 2012 to 51 days this November. Although the average market time is up four days from October to its highest level since May, the average days on market for condos sold in November remains a full week less than the year-to-date average list time of 58 days, suggesting a strong sellers market in which buyer demand is outpacing the supply of condos for sale.
• The number of condominiums placed under agreement increased for the thirtieth time in the past 31 months, increasing 12.4 percent over the previous November to 670 units placed under contract in November 2013. Its the most active November for pending sales since November 2006 when approximately 750 condos were placed under contract. Mirroring the detached single-family home market, pending sales declined on a month-to-month basis by 19.6 percent from October, and are now at their lowest level since February 2012 when 713 condominiums were put under contract.
• The number of condos on the market declined for a twenty-eighth consecutive month in November, declining 34 percent during the past 12 months to 1,330 condos for sale, and tumbling 60 percent (or more than 2,000 units) from November 2011. Like the single-family market, the current inventory of condos for sale is the lowest monthly listing total in more than a decade, and has been remained persistently below 2,000 units for sale for 10 of the past 12 months. At the current sales pace there is just a 1.9 month supply of condos available for sale, which is down steadily from last year when there was a 2.7 month supply in November 2012. As a result, 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.