March 2014 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes declined on an annual basis for a third consecutive month (and fourth time in the past five months) in March, dropping nearly 12 percent from the same month last year to 543 homes sold in March 2014. Its the percentage decrease in single-family home sales since last November, when sales fell 12.1 percent from the same month one year earlier. In addition, the 543 homes sold last month is the lowest home sales total for the month of March in five years. The last time fewer homes sales occurred in March was in 2009 when 417 homes sold.

Collectively, during the first quarter of 2014, single-family home sales are down 7.3 percent, from 1,638 homes sold from January March 2013 to 1,518 homes sold during the same three-month period this year. The slower sales pace can be attributed to todays record low inventory level of homes for sale, higher home prices which have reduced housing affordability levels over the past year, and the harsh, prolonged winter, all of which have hampered buyers in their home search in recent months.

• On a month-to-month basis, detached single-family home sales rose sharply in March, increasing 33.7 percent from an upwardly revised 406 detached home sales in February. This is the first gain in month-to-month sales activity since December, and the largest percentage increase in month-to-month home sales since June 2013 when sales rose 35 percent. The stronger sales pace over the past month is not a surprise however, given the cyclical nature of the local housing market in New England and the fact that March typically marks the start of the spring home buying season. By comparison, last year home sales rose 44.8 percent in March, and in 2012 sales improved 37.4, in March from February.
• The monthly median selling price for detached single-family homes increased for a eighteenth consecutive month in March, rising 16.3 percent on an annual basis to $500,000. Its the first time since July 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 March, eclipsing the previous record high median selling price for the month set in March 2006 when the median price of homes sold was $466,250. Meanwhile, the rate of price appreciation during March is the largest annual percentage increase in the monthly median home price since last September when the median price rose 16.4 percent from September 2012.

The current period of prolonged home price appreciation reflects the strong pent-up demand for homes that occurred during the great recession of 2008-2011 and the upward pressure being put on home prices as buyers compete for a limited supply of homes for sale. In fact, March marks the thirteenth consecutive month in which the ratio of original listing price to sales price received by sellers has stood at or above 95 percent. Furthermore, the monthly median selling price has now risen by double-digits in each of the first three months of this year having risen 13.2% in January and 11.6% in February. As a result, the 2014 first quarter median selling price of $490,813 is up 14.1 percent from first quarter last year when the median selling price stood at 430,000. The last time the median single-family home selling price increased by double-digits on an annual basis for three consecutive months was June-August 2004.

On a month-to-month basis the median selling price also rose, but much more modestly so, climbing 4.2 percent from February. At present, the March median price of $500,000 is up nearly 43 percent from March 2009, when home values bottomed out at $350,000 during the ecession.

• The average list time for homes sold declined by more than three weeks (25 days) during the pas year from 107 days in March 2013 to 82 days thisMarch. Its the twenty-fifth consecutive month that the average time to sell a single-family home has fallen on an annual basis. On a monthly basis, listing time also dropped by a full week (7 days) from February when homes sold in an average of 89 days.
• Pending home sales volume declined modestly in March, decreasing nearly 4 percent over the past 12 months to 1,120 homes placed under contract. However, on a month-to-month basis, pending sales rose sharply by 65.7 percent from February when a downwardly revised 676 homes went under agreement. Notably, this is the highest volume for pending sales since June 2013, when 1,283 homes were put under contract, an indication that buyer demand has picked up markedly with the arrival of the spring market.
• The inventory of single-family homes for sale continues to trail historic norms, declining on an annual basis by nearly 16.3 percent in March and by one-half (50.2%) in the past 24 months. Its the twenty-ninth time in the past 30 months the number of homes listed for sale has dropped from the same month one year earlier, and with under 2,000 listings on the market as of March 31 the supply of homes for sale entering April is at its lowest level in more than a decade. Notably, on a month-to-month basis, the number listings improved 4.7 percent from February, but that increase reflects just 90 additional homes and will have little effect in addressing the inventory shortage in the local housing market.

The inventory of homes for sale as expressed in months of supply also dipped from 3.9 months last March to 3.7 months in March 2014. Todays tighter inventory level can be attributed to a sizeable number of households still being underwater on their mortgages and not in a position to sell, few new homes being constructed, and a reluctance by many homeowners to list their homes for sale over concerns that wont be able to find another to buy in a timely fashion if theirs sells quickly. 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 discourage other buyers from entering the housing market.

The Condominium Market:

• After slipping from year ago levels in each of the first two months of this year, condominium sales rebounded in March, increasing 1.6 percent (or 10 units) on an annual basis to 438 units closed in March 2014. Although modest, the sales gain pushed the volume of condo sales to their highest level of the month of March in four years, and places March 2014 as the sixth busiest March for condo sales on record in Greater Boston. Sales were flat over the entire first quarter however, with closing up less than one-half of one percent (0.4%) from 1,577 condos sold from January March 2013 to 1,583 units sold during the same three-month period this year.

As was the case in the detached single-family home market, with the arrival of the spring selling season, sales activity improved sharply on a month-to-month basis in March, increasing nearly 52 percent from an upwardly revised 420 condos sold in February. Demand for condos remains especially strong among suburban empty-nesters looking to relocate to Boston, as well as with investors, and renters looking to become first-time homeowners.

• The median selling price for condominiums rose steadily on an annual basis for an thirteenth consecutive month in March, increasing a healthy 7.8 percent over the past year to a new record high median price for March of $436,500. That tops the previous high median price for the month set a year ago, when the median selling price was $405,000. The last time the median selling price for condos rose for 13 straight months on a year-to-year basis was December 2004 December 2005.

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 strong buyer demand from is fueling much of the rapid run up in prices of late. As a result, sellers are benefitting as the percentage of original list price to selling price increased to 98.9 percent in March, its highest level in eight months dating back to July 2013 when it reached 99.9 percent. Notably, the luxury condos in Boston and Cambridge remain in high demand, with sales of high-end units priced at $1 million climbing 46 percent over the past 12 months (54 in February 2014 vs. 37 in February 2013), and thats helping to drive up the median selling price as well.

The median selling price also appreciated on a month-to-month basis in March, climbing 9.1 percent from February. Meanwhile, for the winter quarter, the condominium median selling price increased 12.1 percent, from a median price of $379,000 in the first three months of 2013 to $424,930 in the first quarter of this year. As of last month, the median selling price is up 61.7 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 modestly over the past 12 months by nearly one week (6 days), from an average of 71 days on the market in March 2013 to 65 days this March. On a month-to-month basis, average market time also declined by a full two weeks (14 days) from February, offering further evidence that buyer demand has remained steady and will improve further with the advent of the spring market.
• The number of condominiums placed under agreement slid for the third time in past four months on an annual basis, declining 11 percent from the previous March to 1.031 units placed under contract in March 2014. Conversely, on a month-to-month pending sales increased sharply rising 41.4 percent from a downwardly revised 729 pending sales in February, an indication that buyer demand from entry-levels looking to escape higher rents, empty-nesters tired of property maintenance issues, and overseas investors should improve steadily with the arrival of the spring market and remains strong despite the current inventory shortage.
• The number of condos on the market declined for a thirty-second consecutive month in March, declining 26 percent over the past 12 months to 1,273 condos for sale, and falling 61 percent (or nearly 2,000) from March 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 12 of the past 15 months. At the current sales pace there is just a 2 month supply of condos available for sale, which continues a steady decline from year ago levels when there was a 2.8 month supply in March 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.