August 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 an eighth consecutive month in August, sliding roughly 10 1/2 percent over year ago levels to 1,280 homes sold in August 2014. Its the largest percentage decrease in single-family home sales since April when sales fell 12.4 percent on an annual basis. The last time home sales fell for eight consecutive months was November 2008 June 2009.

Notably, despite the sharp drop in year-over-year sales, the level of activity is still quite healthy by historical standards. Last months sales total is the sixth best on record for the month of August in Greater Boston, equaling the sales volume from two years in August 2012 when 1,280 homes were sold. A strong labor market, record high rents, and the steady recovery in home values over the past two years are helping to attract home buyers. Additionally, new household formation is on the rise, and with mortgage rates remaining near record lows, housing demand remains solid.

• Single-family home sales also decreased on a month-to-month basis in August, dropping 13.3 percent from an upwardly revised 1,476 homes sold in July, but it should be noted that last months sales total was the second highest on record for the month and is the seven highest monthly sales total on record for any month in Greater Boston.
• The monthly median selling price for single-family homes increased for a twenty-third consecutive month in August, appreciating 3.7 percent on an annual basis to $539,000. Its the first time since February 2004December 2005 that the single-family median home selling price has risen for such an extended period. Notably, last months median selling price is the highest median price ever recorded for August, equaling the record price for the month previously set in August 2005 during the prior decades housing boom. Although this reflects a modest decrease of 2 percent in the median price on a month-to-month basis, the August median selling price of $539,000 is still up 54 percent from March 2009, when home values bottomed out at $350,000 during the recession.

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, August marks the eighteenth consecutive month in which the ratio of original listing price to sales price received by sellers has stood at or above 95 percent, and with the typical home sold in August selling for 98.1% of its original list price, its just a one percent below the 21st century best ratio of 99.1% set two months earlier in June 2014.

• Following 28 months of decreases, the average market time for homes sold increased for a second consecutive months in August, but even so the typical home remained on the market for less than two full months for a fourth straight month. Single-family homes sold last month were on the market an average of 55 days, compared to 48 days in August 2013, and also increased modestly on a month-to-month basis from an average of 52 days on the market in July 2014.
• Pending home sales volume declined for the first time in three months, decreasing nearly 4 percent in August from the same month one year earlier to 853 homes placed under contract. Its the sixth month this year pending home sales activity has failed to keep pace with the comparable month in 2013 and the number of homes put under agreement this August is the lowet in six months, dating back to this past February when fewer than 650 homes went under contract. On a month-to-month basis, pending sales also ell by nearly 14 percent from July hen a downwardly revised 990 homes went under agreement.
• The inventory of single-family homes for sale continues to trail historic norms, declining on an annual basis by 3.1 percent in August and by 25.5 percent over the past 24 months. Its the thirty-fourth time in the past 35 months the number of homes listed for sale has dropped from the same month one year earlier, and with 2,685 listings on the market as of August 31 the supply of homes for sale entering September is at its lowest level in more than a decade. On a month-to-month basis the number listings also shrunk by 8.8 percent from an upwardly revised 2,944 homes on the market at the end of July. Notably, the number of new listings placed on the market in August also fell 17 percent from 1,193 new listings one month earlier to 989 in August, marking the lowest number of new listings added to the market since February when 928 homes were put up for sale.

The inventory of homes for sale as expressed in months of supply improved modestly over the past 12 months, increasing from 1.9 months of supply in August 2013 to 2.1 months of supply this August. That said, a balanced market occurs when 7.5 8.5 months of supply exists, so at the current sales pace there is an woefully insufficient supply of homes available to meet buyer demand.

The Condominium Market:

• Sales activity in the condo market declined on an annual basis for a fourth consecutive month in August, decreasing 16.3 percent from 1,277 units closed in August 2013 to 1,069 condos sold this August. Its the largest percentage drop in condo sales on an annual basis in over three years, dating back to May 2011 when sales fell 17 percent from the same month one year earlier. While this is the lowest condo sales total for August in three years, the sales volume this August is still the eighth highest on record for the month in Greater Boston. The peak month was August 2005 when 1,394 condos were sold. Condominium sales also slowed on a month-to-month basis in August, declining 6 percent from an upwardly revised 1,137 units closed in July.
• The median selling price for condominiums rose on an annual basis for an eighteenth consecutive month in August, and even though the rate of appreciation was the most modest over that period, the 3.4 percent increase over the past year was enough to lift the median price to a new all-time high for August of $429,966. That tops the previous high median price for the month set a year ago when the median selling price was $416,000. The last time the median selling price for condos rose for 18 straight months on a year-to-year basis was July 2004 December 2005.

The more modest price growth may be an indication that buyers are beginning to balk at current pricing levels and the condo market may be nearing its peak in terms of affordability, especially for first-time buyers. Nonetheless, the condo market remains plagued by an insufficient inventory of listings to meet current buyer demand. As a result, sellers are benefitting. In fact, the percentage of original list price to selling price hit 100 percent for a fourth consecutive month in August, meaning the typical condo owner was able to sell their unit for the full amount of their original asking price.

On a month-to-month basis, the median selling price was essentially stable compared to July ($430,000), and thus remains up a nearly 60 percent (59.2%) 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 increased on an annual basis for a third consecutive month in August, increasing by 10 days from 40 days on the market last August to 50 days on the market in August 2014. Average market time also increased ever so slightly on a month-to-month basis from an average of 49 days in July, offering further evidence that the shortage of listings and record high prices are hindering buyers ability to enter the housing market.
• The number of condominiums placed under agreement decreased 5 percent in August, declining from a downwardly revised 752 units placed under contract in August 2013 to 715 units this past August. This marks the sixth time this year that pending sales have declined on an annual basis. Pending sales also declined on a month-to-month basis, falling nearly 20 percent from a downwardly revised 891 units put under contract in July.
• The number of condos on the market declined for a thirty-seventh consecutive month in August, declining 25.8 percent over the past 12 months to 1,312 condos for sale, and by nearly half (46%) since August 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 17 of the past 20 months. At the current sales pace there is just a 1.2 month supply of condos available for sale, which continues a steady decline from year ago levels when there was a 1.4 month supply in August 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 suburban communities where few new units are being built.