May 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 fifth consecutive month in May, though more modestly than in the two prior months, sliding 10.3 percent from the same month last year to 983 homes sold in May 2014. Its the lowest sales total for the month of May since May 2011 when 834 homes were sold, and the first time since February June 2011 that home sales have fallen for five consecutive months in Greater Boston.

The persistently low supply of homes for sale locally continues to hamper sales activity, limiting options for buyers and holding back prospective home sellers from putting their home on the market over concerns that wont be able to find another home to purchase. In addition, higher home prices which have reduced housing affordability levels over the past year, and tight credit requirements along with substantial student debt are hindering the ability of first-time buyers to enter the housing market.

• On a month-to-month basis, detached single-family home sales rose sharply, increasing 45.8 percent from an upwardly revised 674 detached home sales in April. 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 42.9% in May, in 2012 sales improved 35.5% from April to May, and in 2011 sales climbed 26.4% in May from one month earlier.
• The monthly median selling price for single-family homes increased for a twentieth consecutive month in May, rising 6.4 percent on an annual basis to $532,000. Its the first time since May 2004 December 2005 that the singlefamily median home selling price has risen for such an extended period. Notably, last months median selling price sets a new all-time high for May, eclipsing the previous record high median selling price for the month set last year when the median price of homes sold was $500,000. Its also the fifth highest monthly median sales price on record and just 2.4% below the all-time high monthly median price of $545,000 set in June 2013.

Buyers meanwhile can take solace in the fact that the median price increase continued to turn more modest in May, as the rate of price appreciation remained in single digits for a second consecutive month and grew at its lowest rate since December 2013 when prices also appreciated 6.4 percent from the same month one year earlier.

The current period of prolonged home price appreciation is a reflection of todays healthy local economy, strong pent-up demand for homes that built up 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, May marks the fifteenth 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 year, having climbed steadily from 95.6% in January, to 98.7% May, and is now at its highest level in more than a decade.

On a month-to-month basis the median selling price also rose, improving 1.3 percent from April. The May median price of $532,000 is up 52 percent from March 2009, when home values bottomed out at $350,000 during the recession.

• The average list time for homes sold declined by more than two weeks (18 days) during the past year from 75 days in May 2013 to 57 days this May. Its the twenty-seventh consecutive month that the average time to sell a singlefamily home has fallen on an annual basis. On a monthly basis, listing time also declined by nearly one wek from April when homes sold in an average of 81 days.
• Pending home sales volume declined modesly for a third consecutive month in May, decreasing nearly 2 percent over the past 12 months to 1,444 homes placed under contract. However, on a month-to-month basis, pendingsales rose nearly 13 percent from April when a downwardly revised 1,279 homes went under agreement. Notably, this is the highest volume for pending sales since last May when 1,474 homes were put under contract, an indication that buyer demand has steadily improved as the weather turns warmer.
• The inventory of single-family homes for sale continues to trail historic norms, declining on an annual basis by nearly 7 percent in May and by more than one-third (35.3%) in the past 24 months. Its the thirty-first time in the past 32 months the number of homes listed for sale has dropped from the same month one year earlier, and with 2,837 listings on the market as of May 31 the supply of homes for sale entering June is at its lowest level in more than a decade. However, on a month-to-month basis, the number listings improved 12.7 percent from April, and even more noteworthy is the fact the 2,054 new single-family homes listed in May is the most since last April when 1,994 new listings came on the market.

The inventory of homes for sale as expressed in months of supply was nearly stable over the past 12 months, inching up from 2.8 to 2.9 months of supply this May. A balanced market occurs when 7.5 8.5 months of supply exists, 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 declined on an annual basis for the first time in three months during May, falling 13.1 percent on an annual basis to 928 units closed in May 2014. Its the largest percentage drop in condo sales on an annual basis in nearly three years, dating back to June 2011 when sales slid 13.2% from the same month one year earlier. While this is the lowest condo sales total for May in three years, the sales volume this May is still the seventh highest on record for the month, topped only by May 2013, May 2012, May 2007, May 2006, May 2005 and May 2004, all of which saw over 1,000 condominium sales recorded. The peak month was May 2007 when 1,195 condos were sold.
• Sales also improved steadily on a month-to-month basis in May, increasing 13.7 percent from an upwardly revised 816 condos sold in April. 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 fifteenth consecutive month in May, increasing 5.8 percent over the past year to a new record high median price for May of $433,750. That tops the previous high median price for the month set a year ago, when the median selling price was $410,000, and is just 0.6 percent below the all-time highly monthly median selling price of $436,500 set this past February. The last time the median selling price for condos rose for 15 straight months on a year-to-year basis was October 2004 December 2005. While these numbers are all positive, the one cautionary note is that the rate of appreciation in the median price increased last month at the smallest percentage since last July, when the median sales price rose 4 percent on an annual basis.

Similar to the detached home market, the condo market also has been plagued by a lack of listings over the past few years and strong buyer demand is fueling much of the rapid run up in prices of late. As a result, sellers are benefitting with the percentage of original list price to selling price reaching 100.7 percent in May. That sets a new benchmark, topping the 99.9% of list to sales price ratio set in July 2013, and means on average condo owners who were successful in selling their unit in May were able to do so for more than the original asking price.

On a month-to-month basis the median selling price also improved, though at a rate more modest than the year- to-year price change in May. Mays median selling price rose just 3.1 percent from April, an indication that theres been some modest improvement in the inventory of condos for sale, which now stands at its highest level in six months, as well as a hint that prices may be reaching their peak. In fact, as of last month, the median selling price is up 60.6 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 three days, from an average of 51 days on the market in May 2013 to 48 days this May. Its the thirty-first consecutive month that the average time to sell a condominium has decreased on an annual basis. On a month-to-month basis, average market time also declined by just over a week (8 days) from April, offering further evidence that buyer demand has remained steady and will likely continue to be strong into the summer months.
• The number of condominiums placed under agreement slid for the fifth time in past six months on an annual basis, declining 10 percent from the previous May to 1,130 units placed under contract in May 2014. Pending sales also decreased on a month-to-month, dropping 4.3 percent from a downwardly revised 1,181 units going under contract in April, an indication that buyer activity may be softening due to higher prices and a lack of sufficient inventory.
• The number of condos on the market declined for a thirty-fourth consecutive month in May, declining 22.8 percent over the past 12 months to just over 1,600 condos for sale, and by nearly half (49.6%) since 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 14 of the past 17 months. At the current sales pace there is just a 1.7 month supply of condos available for sale, which continues a steady decline from year ago levels when there was a 1.9 month supply in May 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.