December 2013 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes rose steadily on an annual basis in December, improving a healthy 9.3 percent over the same month one year ago, from 819 homes sold last December to 895 homes sold in December 2013. Its the highest sales volume of single-family homes during the month of December in nine years, and fifth best December sales total for the detached single-family home market on record in Greater Boston, exceeded only by December 2003 (1,034 homes sold), December 1997 (994 homes sold), December 1998 (950 homes sold) and December 2004 (945 homes sold). The December sales rebound follows a 12 percent decline in sales activity during November, making it the fifth time in the last six months home sales have increased on a year-over-basis.

The December sales gain reflects renewed confidence in the housing market and broader economy which has been fueled of late by steady appreciation in home prices, strong gains on Wall Street, and passage of legislation on Capitol Hill to address, at least temporarily, the federal budget and debt ceiling. In addition, concerns over higher interest rates and new lender underwriting requirements set to take effect in January 2014 with implementation of the Qualified Mortgage Rule have also served to motivate many buyers either get off the fence or extend their home search beyond the start of the school year.

Notably, over the final three months of 2013, sales rose a modest 2 percent from the final quarter of the previous year, increasing from 2,507 homes sold during the fourth quarter of 2012 to 2,558 homes sold in the same quarter this year. In addition, this past year was the busiest for home sales in 14 years, as sales increased nearly 7 percent from 2011 to 11442 closed transactions, the most since 14,605 homes sold in 1999.

• Somewhat unexpectedly, sales also rose on a month-to-month basis in December climbing 12.4 percent from an upwardly revised 796 homes sold in November. Its the first measurable increase in six months for single-family home sales from the previous month on the calendar, dating back to June when sales spiked 34.4 percent from May. Although sales growth from November to December is not unprecedented (and last occurred in 2011 when sales rose 7.8 percent between November and December), its much more common for sales activity to slide from month-to-month throughout the autumn and winter months due to the seasonal nature of homes sales in New England.
• The monthly median selling price for detached single-family homes increased for a fifteenth consecutive month in December, improving 6.4 percent on an annual basis to $500,000. Its the first time since October 2004 December 2005 that the single-family median home selling price has risen for such an extended period. Additionally, last months median selling price sets a new all-time high for December, eclipsing the previous record high median selling price for the month set in December 2009 when the median price of homes sold was $484,500. Its also the highest monthly median selling price for single-family homes if four months, dating back to September, which had a median price of $500,500.

For the three months ending in December, the median selling price rose 7.3 percent, from a median price of $449,000 in the 2012 fourth quarter to $482,000 during the same three-month period this year. Similarly, for the calendar year, the median selling price for detached homes increased a healthy 7.6 percent, climbing from an annual median price of $459,900 last year to $495,000 in 2013. Thats the strongest annual pice appreciation in nearly a decade, dating back to 2004 when the median price rose 9.6 percent frm one year earlier.

On a month-to-month basis, the median price also rose a healthy 5.3 percent from $475,000 in November, which is notable since that stads as the record high median price for the month of November in Greater Boston. At present, the December median price of $500,000 is up nearly 43 percent from March 2009, when home values bottomed out at $350,000 during the recession.

The current period of prolonged home price appreciation 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. Furthermore, 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.

Meanwhile, the market for high-end home sales remains strong with sales of homes valued at $1 million or more up by more than one quarter (28%) over the past year (106 sales in December 2012 to 136 in December 2013), while sales of lower-priced distressed properties (i.e. foreclosed homes and short-sales) have continued to decline steadily over the past year, sliding 25 percent from last December. As a result, this higher concentration of more luxury home sales and fewer homes being sold at discounted pricing has also helped to lift the median selling price.

• The average list time for homes sold declined by nearly one month (28 days) during the past year from 97 days in December 2012 to 69 days this December. Its the twenty-second consecutive month that the average time to sell a single-family home has fallen on an annual basis. While average market time increased from 65 days in November, the time on market for homes sold in December remains below the 75 day average observed during the previous 12 months.
• Pending home sales rose on an annual basis for a fifteenth consecutive month in December, increasing 1.8 percent over the same month last year to 510 homes placed under contract, making it the busiest December for homes to be put under agreement since 2006 when close to 600 homes were put under contract. On a month-to-month basis, pending sales declined 29 percent from November when a downwardly revised 718 homes went under agreement.
• The inventory of single-family homes for sale remains well below historic norms, declining on an annual basis by 31 percent in December and by more than one-half (52%) in the past 24 months. Its the twenty-sixth time in the past 27 months the number of homes listed for sale has dropped from the same month one year earlier, and with 730 fewer homes on the market this December compared to the same month in 2012, the 1,613 listings as of December 31 represents the lowest December supply of homes for sale in over a decade. On a month-to-month basis, the number listings also fell 30 percent from an upwardly revised 2,315 homes on the market in November.

The inventory of homes for sale as expressed in months of supply also declined from 2.9 months last December to 1.8 months in December 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, emptynester 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, so at the current sales pace there is an insufficient supply of homes to meet demand, which is likely to frustrate buyers who lose out in competitive, multiple offer situations, and will other buyers out-of-the-market.

The Condominium Market:

• After falling unexpectedly the previous month, condominium sales rebounded in December, improving a modest 1.3 percent over year ago levels to 776 units closed in December 2013. Similar to the detached single-family home market, this represents the highest sales total observed in the Greater Boston condo market during the month of December in nine years, and is the second highest sales volume on record for the month, topped only by the 830 condos sold in December 2004. Notably, sales activity also rose on a month-to-month basis, climbing steadily by 9.6 percent from an upwardly revised 708 units sold in November 2013.

Meanwhile, for the entire fourth quarter sales were essentially flat, increasing just one half of one percent, from 2,235 condos sold in the three months from October December 2012 to 2,248 in the final three months of this year. However, sales rose steadily over the past calendar year, improving 7.4 percent on an annual basis, from 9,655 condos sold one year ago to 10,370 in 2013. Driven by demand from suburban empty-nesters looking to relocate to Boston, as well as investors, and renters looking to become first-time homeowners, the Greater Boston condominium market experienced its best year since 2005 when 10,750 condos were sold.

• The median selling price for condominiums increased on an annual basis for a tenth consecutive month in December, appreciating 11.2 percent over the past year to $423,250. Significantly, this figure not only surpasses the previous record high median selling price observed during the month of November (set one year ago with a median price of $380,000 in December 2012), but also establishes a new all-time high monthly median selling price for condos in Greater Boston, eclipsing the old record of $420,000 set just six months earlier in June 2013. Notably, the last time the median selling price for condos rose for 10 straight months on a year-to-year basis was March 2012 January 2013.

Over the final three months of the year, the median selling price rose a healthy 10.5 percent, climbing from a median price of $378,343 in the final quarter last year to $418,000 during the fourth quarter of 2013. In addition, for the full calendar year, the median selling price for condominiums increased 6.9 percent, from an annual median price of $379,000 in 2012 to $405,000 this past year. This marks the largest annual price appreciation in the condominium median selling price in nearly a decade, dating back to 2004 when the condo median selling price rose 7.9 percent.

On a month-to-month basis, the median price also rose a healthy 5.3 percent from $475,000 in November, which is notable since that stands as the record high median price for the month of November in Greater Boston. At present, the December median price of $500,000 is up nearly 43 percent from March 2009, when home values bottomed out at $350,000 during the recession.

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 December to 98.1 percent in December 2013. This marks the ninth 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 is now up 56.8 percent from the lowest median selling price reported in the last market correction which occurred in January 2009 when the monthly median price bottomed ot at $270,000.

• The average time for condominiums to sell has declined steadily over the past 12 months by nearly one month (29 days), from an average of 84 days on the market in December 2012 to 55 days this December. Although the average market time is up four days from November to its highest level since April, the average days on market for condos sold in December remains below the 12-month 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 declined for the first time since October 2011 (26 months), slipping nearly 4 percent over the previous December to 441 units placed under contract in December 2013. On a month-to-month pendings also fell 32.2 percent from a downwardly revised 650 pending sales in November, and are now at their lowest level since in nearly three years, dating back to January 2011 when 408 condos went under contract.
• The number of condos on the market declined for a twenty-ninth consecutive month in December, declining 30 percent during the past 12 months to 1,073 condos for sale, and tumbling 60 percent (or more than 1,600 units) from December 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 11 of the past 12 months. At the current sales pace there is just a 1.4 month supply of condos available for sale, which is down steadily from the previous month when there was a 1.9 month supply in November, and from last year when there was a 2.0 month supply in December 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.