April 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 fourth consecutive month (and fifth time in the past six months) in April, slipping 12.4 percent from the same month last year to 672 homes sold in April 2014. Its the largest percentage decrease in single-family home sales since June 2011, when sales fell 13.2 percent from the same month one year earlier. The last time fewer homes sold in April also was in 2011 when 660 homes were sold.

The slower sales pace can be attributed to record todays low inventory level of homes for sale, higher home prices which have reduced housing affordability levels over the past year, and tight credit requirements which are hindering the ability of first-time buyers to enter the housing market. In addition, the harsh, prolonged winter delayed the start of the spring market as buyers postponed their home search and that also dampened sales activity in April.

• On a month-to-month basis, detached single-family home sales rose steadily, increasing 23.1 percent from an upwardly revised 546 detached home sales in March. The stronger sales pace is not unexpected however, given the cyclical nature of the housing market in New England. By comparison, last year home sales rose 24.5 percent in April and in 2012 sales improved 14.7 percent in April from March.
• The monthly median selling price for single-family homes increased for a nineteenth consecutive month in April, rising 9.4 percent on an annual basis to $525,000. Its the first time since June 2004 December 2005 that the single-family median home selling price has risen for such an extended period. Notably, last months median selling price sets a new all-time high for April, eclipsing the previous record high median selling price for the month set in April 2005 when the median price of homes sold was $484,450. However, in a more positive note for buyers, the median price increase turned more modest in April, as the rate of price appreciation returning to single digit for the first time since December 2013.

The current period of prolonged home price appreciation reflects the strong pent-up demand for homes that occurred during the 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, April marks the fourteenth 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 ratio of original list price to sales price has risen steadily since the beginning of the, having climbed from 95.6% in January, to 96% in February, 97% in March and 98% in April.

On a month-to-month basis the median selling price also rose, improving 5 percent from March. The April median price of $525,000 is up 50 percent from March 2009, when home values bottomed out at $350,000 during the recession.

• The average list time for homes sold declined by nearly two weeks (12 days) during the past year from 93 days in April 2013 to 81 days this April. Its the twenty-sixth consecutive month that the average time to sell a single-family home has fallen on an annual basis. On a monthly basis, listing time remained largely unchanged, declining by one from March when homes sold in an average of 89 days.
• Pending home sales volume declined modestly for a second consecutive month in April, decreasing nearly 5 percent over the past 12 months to 1,313 homes placed under contract. However, on a month-to-month basis, pending sales rose a healthy 21.6 percent from March when a downwardly revised 1,080 homes went under agreement. Notably, this is the highest volume for pending sales since May 2013 when 1,477 homes were put under contract, an indication that buyer demand has piked up markedly with the arrival of the spring market.
• The inventory of single-family homes for sale continues totrail historic norms, declining on an annual basis by nearly 12.3 prcent in April and by almost one-half (42.9%) in the past 24 months. Its the thirtieth time in the past 31 months the number of homes listed for sale has dropped from the same month one year earlier, and with just over 2,400 listings on the market as of April 30 the supply of homes for sale entering May is at its lowest level in more than a decade. However, on a month-to-month basis, the number listings improved 15.6 percent from March, and even more noteworthy is the fact that the 1,882 new single-family homes were listed in April is the most since last May when 1,981 new listings came onto the market.

The inventory of homes for sale as expressed in months of supply was stable over the past 12 months, remaining unchanged from last April at 3.6 months of supply. 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:

• Sales activity in the condo market was flat in April, as sales were essentially unchanged, improving by just 0.1 percent (or 1 unit) on an annual basis to 806 units closed in April 2014. Despite being stable over the past year, the 806 condos sold last month is the most of any April in the past four years, and ties with April 2010 as the fourth busiest April on record for condominium sales in Greater Boston. Only April 2005 with 956 condo sales, April 2004 with 892 condo sales, and April 2007 with 823 condo sales saw a higher level of condominium sales activity.

As was the case in the detached single-family home market, sales activity improved sharply on a month-to-month basis in April, increasing 25.2 percent from an upwardly revised 644 condos sold in March. 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 a fourteenth consecutive month in April, increasing a healthy 8.4 percent over the past year to a new record high median price for April of $419,950. That tops the previous high median price for the month set a year ago, when the median selling price was $387,500. The last time the median selling price for condos rose for 14 straight months on a year-to-year basis was November 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 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 99.7 percent in April, its highest level in nine months dating back to July 2013 when it reached 99.9 percent. Notably, luxury condos in Boston and Cambridge remain in high demand, with sales of high-end units priced at $1 million climbing by nearly one-third (32.7%) over the past 12 months (69 in April 2014 vs. 52 in April 2013), and thats helping to drive up the median selling price as well.

On a month-to-month basis the median selling price for condos did show some moderation however, sliding 3.8 percent from March. The decrease is due largely to a higher concentration of condos sold at entry-level end of the market in April than in March, as condo units priced under $300,000 increased by more than one quarter (26.2%) from March to April (164 in March to 207 in April). Notably, as of last month, the median selling price remains up 55.5 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 declined over the past 12 months by a one full week (7 days), from an average of 63 days on the market in April 2013 to 56 days this April. On a month-to-month basis, average market time also declined a slighter greater amount (9 days) from March, offering further evidence that buyer demand has remained steady and will likely improve further as the spring selling season evolves.
• The number of condominiums placed under agreement slid for the fourth time in past five months on an annual basis, declining nearly 5 percent from the previous April to 1,207 units placed under contract in April 2014. Conversely, on a month-to-month pending sales increased 19.3 percent from a downwardly revised 1,012 pending sales in March, 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-third consecutive month in March, declining 26.6 percent over the past 12 months to 1,452 condos for sale, and falling 56 percent (or nearly 1,850 units) from April 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 13 of the past 16 months. At the current sales pace there is just a 1.8 month supply of condos available for sale, which continues a steady decline from year ago levels when there was a 2.5 month supply in April 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.