January 2014 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes declined on an annual basis in January, slipping 6 percent (or 36 units) over the same month last year to 561 homes sold in January 2014. This marks the second time in the past three months that sales activity has dropped compared to the same month the previous year, which equals the frequency with which single-family sales volume decreased during the 12 months prior to this past November when sales slid 12 percent. Still, it was the third busiest January for home sales in past 10 years, and eleventh most active January for detached singlefamily home sales on record in Greater Boston.

The sales slowdown is the result of softening buyer demand due to rising mortgage rates, higher home prices, and a depleted inventory of homes for sale, which has persisted now for more than two years.

• Sales also declined on month-to-month basis, decreasing 37.5 percent from December. The decline was not unexpected since housing demand traditionally drops from December to January as a result of holiday-related activities and the seasonal nature of the New England housing market. In fact, the decrease in sales last month is comparable to declines in the five prior years when sales fell 36%, 35%, 32%, 29% and 27% in January from one month earlier.
• The monthly median selling price for detached single-family homes increased for a sixteenth consecutive month in January, climbing 12.8 percent on an annual basis to $485,100. Its the first time since September 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 January, eclipsing the previous record high median selling price for the month set in January 2005 when the median price of homes sold hit $472,000. Notably, the last time the monthly median selling price experienced a more substantial increase on an annual basis was just four months ago, when the median price jumped 16.7 percent in September 2013 from the same month one year earlier.

On a month-to-month basis, the median selling price did moderate, decreasing a modest 3 percent from a downwardly revised $499,950 in December. Nonetheless, the January median price of $485,100 remains up 38 percent from March 2009, when home values bottomed out at $350,000 during the recession.

The current period of prolonged home price appreciation reflects the upward pressure being put on home prices as buyers compete for a limited supply of homes for sale. In fact, January marks the eleventh consecutive month in which the ratio of original listing price to sales price received by sellers has been at or above 95 percent.

• The average list time for homes sold declined by nearly one month (29 days) during the past year from 108 days in January 2013 to 79 days this January. Its the twenty-third consecutive month that the average time to sell a single-family home has fallen on an annual basis. However, days on market increased modestly from a 70 day average for homes sold in December, and the average market time for January home sales is the highest since April 2013 when it took an average of 93 for single-family homes to sell.
• Pending home sales volume shrunk for the first time in 16 months in January, sliding 11.7 percent from the previous January to 549 homes placed under contract. However, on a month-to-month basis, pending sales rose 13.7 percent from December when a downwardly revised 483 homes went under agreement. Still, its the slowest January for pending sales in three years dating back to January 2011, when fewer than 500 homes were put under contract.
• The inventory of single-family homes for sale remains well below historic norms, declining on an annual basis by nearly 30 percent in January and by one-half (50.9%) in the past 24 months. Its the twenty-seventh time in the past 28 months the number of homes listed for sale has dropped from the same month one year earlier, and with just over 1,600 listings on the market as of January 31 the supply of homes for sale is at its lowest level in over a decade. On a month-tomonth basis, the number listings also fell 5.7 percent from an upwardly revised 1,715 homes on the market in December.

The inventory of homes for sale as expressed in months of supply also declined from 3.8 months last January to 2.9 months in January 2014. 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 unti 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 insuffiient spply 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:

• Condominium sales rose on an annual basis for a second consecutive month in January, albeit modestly, increasing roughly 1 percent over year ago levels to 518 units closed in January 2014. This marks the highest January sales volume in seven years and is the fourth highest sales total on record for the month of January, topped only by January 2005 (655 units sold), January 2007 (638 units sold), and January 2006 (531 units sold).

Similar to the detached single-family home market, sales activity fell on a month-to-month basis, decreasing 34 percent from an upwardly revised 788 condos sold in December.

• The median selling price for condominiums rose steadily on an annual basis for an eleventh consecutive month in January, increasing 13.9 percent over the past year to a new all-time high monthly median price of $420,500. Its the third time in the last 12 months that the median selling price for condos has reached a new high point, with Januarys median price edging out the previous record price of $420,400 set just one month earlier in December 2013. In addition, last months median price eclipses the previous record high selling price for January set just one year ago at $369,250.

The last time the median selling price for condos rose for 11 straight months on a year-to-year basis was February 2012 January 2013. Meanwhile, the rate of appreciation in the median selling price for January is the largest percentage increase in the monthly median selling price in 12 months, dating back to February 2013 when the median price climbed nearly 20 percent from the comparable month the previous year.

As of last month, the median selling price is up 55 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 (25 days), from an average of 88 days on the market in January 2013 to 63 days this January. However, similar to the detached home market, average market time increased by eight days from December and is its highest level since April 2013, when it also took an average of 63 days for the typical condominium in Greater Boston to sell.
• The number of condominiums placed under agreement declined for a second consecutive month in January, slipping nearly 3 percent over the previous January to 636 units placed under contract in January 2014. However, on a month-to-month pendings rose sharply by 49 percent from a downwardly revised 427 pending sales in December, an indication that buyer demand from entry-levels looking to escape higher rents, empty-nesters tired of property maintenance issues, and overseas investors -- remains strong despite the current inventory shortage.
• The number of condos on the market declined for a thirtieth consecutive month in January, declining 30 percent during the past 12 months to 1,101 condos for sale, and falling 60 percent (or more than 1,600 units) from January 2012. 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 2.1 month supply of condos available for sale, which continues a steady decline from year ago levels when there was a 3.1 month supply in January 2013. 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.