February 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 February, sliding 5.2 percent (or 22 units) over the same month last year to 403 homes sold in February 2014. This is the second consecutive month and third time in the past four months sales volume has decreased on a year-over-year basis. In addition, the 403 homes sold last month is the lowest home sales total for February in the past three years.

Meanwhile, on a month-to-month basis, sales also fell by 28.8 percent from an upwardly revised 566 homes sold in January.

The slower sales pace can be attributed todays record low inventory level of homes for sale, higher home prices which have reduced housing affordability levels over the past year, and severe winter weather dating back to mid-December, all of which have hampered buyers in their home search in recent months.

• The monthly median selling price for detached single-family homes increased for a seventeenth consecutive month in February, climbing 11.4 percent on an annual basis to $478,900. Its the first time since August 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 February, eclipsing the previous record high median selling price for the month set in February 2005 when the median price of homes sold was $452,500.

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, February marks the twelfth consecutive month in which the ratio of original listing price to sales price received by sellers has stood at or above 95 percent.

Of some concern, is the fact that the monthly median selling price has appreciated by double-digits in each of the first two months of this year having risen 12.8% in January which matches the number times the median selling price improved by double-digits in all of 2013. With the number of high-end home sales (those priced at $1 million or more) largely unchanged from last February (56 in 2014 vs. 53 in 2013), its evident that prices are being driven up due to competition in the marketplace, in which buyer demand far exceeds the number of available listings of home for sale. As a result, many homes are drawing multi-offer situations in which buyers readily bid above asking price to get the property.

Notably, on a month-to-month basis, the median selling price did moderate, slipping 1.4 percent from January. Nonetheless, the February median price of $478,500 is up 36.7 percent from March 2009, when home values bottomed out at $350,000 during the recession.

• The average list time for homes sold declined by roughly three weeks (22 days) during the past year from 111 days in February 2013 to 89 days this February. Its the twenty-fourth consecutive month that the average time to sell a single-family home has fallen on an annual basis. However, days on market did increase by more than a week since January when homes sold in an average of 79 days. This increase is most likely weather-related. The average market time for February 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 was essentially flat in February, increasing less than 1 percent over the past 12 months to 708 homes placed under contract. However, on a month-to-month basis, pending sales rose steadily by 32.8 percent from January when a downwardly revised 533 homes went under agreement. Its te highest volume for pending sales since October 2013, when 942 homes were put under contract, an indication that buyer demand remains healthy and is begnning to improve once again as the spring market nears.
• The inventory of single-family homes for sale remains well below historic norms, declining on an annual basis by nearly 26 percent in February and by one-half (50.4%) in the past 24 months. Its the twenty-eighth time in the past 29 months the number of homes listed for sale has dropped from the same month one year earlier, and with less than 1,800 listings on the market as of February 28 the supply of homes for sale is at its lowest level in over a decade. Notably, on a month-to-month basis, the number listings improved a modest 3 percent from January, but the increase was negligible and will have little to no effect in addressing the inventory shortage in the local housing market.

The inventory of homes for sale as expressed in months of supply also declined from 5.6 months last February to 4.4 months in February 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, 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, 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:

• Condominium sales eased in February, decreasing a modest 4.4 percent (or 19 units) on an annual basis to 416 units closed in February 2014. Despite the decline in sales activity over the past 12 months, it was the second best February sales total in the past six years and is the seventh highest February sales total on record in Greater Boston.

As was the case in the detached single-family home market, sales activity also fell on a month-to-month basis, decreasing 20.6 percent from an upwardly revised 524 condos sold in January.

• The median selling price for condominiums rose steadily on an annual basis for an twelfth consecutive month in February, increasing 14.3 percent over the past year to a new record high median price for February of $400,000. That tops the previous high median price for the month set in February 2012, when the median selling price was $370,000.

The last time the median selling price for condos rose for 12 straight months on a year-to-year basis was January December 2005. Meanwhile, the rate of appreciation in the median selling price for February is the largest percentage increase in the monthly median selling price in 13 months, dating back to last February when the median price climbed nearly 20 percent from February 2012.

Similar to the detached home market, the condo market also has been plagued by a lack of listings over the past couple of years and the excess demand is causing much of the rapid run up in prices of late. Additionally, demand for luxury condos in Boston and Cambridge continues to grow, with sales of high-end units priced at $1 million climbing 47 percent over the past 12 months (47 in February 2014 vs. 32 in February 2013), and thats helping to drive up the median selling price as well.

As of last month, the median selling price is up 48 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 over the past 12 months by nearly three weeks (18 days), from an average of 95 days on the market in February 2013 to 77 days this February. However, like the detached home market, average market time in the condo market increased steadily by 14 days from January and is its highest level since last February.
• The number of condominiums placed under agreement improved on an annual basis for the first time in three months, increasing nearly 5 percent from the previous February to 747 units placed under contract in February 2014. On a month-to-month pending sales rose even more sharply climbing 21 percent from a downwardly revised 616 pending sales in January, 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 thirty-first consecutive month in February, declining 30 percent over the past 12 months to 1,187 condos for sale, and falling 59 percent (or more than 1,700 units) from February 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 11 of the past 13 months. At the current sales pace there is just a 2.9 month supply of condos available for sale, which continues a steady decline from year ago levels when there was a 3.9 month supply in February 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.