September 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 ninth consecutive month in September, falling 8.2 percent from the same month in 2013 when sales volume reached an eight-year high for the month of September with 919 homes sold. Single-family home sales also decreased on a month-to-month basis in September, dropping 34.4 percent from an upwardly revised 1,286 homes sold in August. For the entire third quarter, home sales slid 6 percent, from 3,837 homes sold in the three months from July- September 2013 to 3,607 in the same period this year.

The market remains plagued by a shortage of listings to meet current housing demand, and this fact along with flat to modest wage growth, still tight credit standards for home financing, and high student debt for many is hindering first-time buyers and others from entering the housing market.

Despite the steady drop in year-over-year sales volume, the level of activity in September was still quite healthy by historic standards. In fact, last months sales total is the ninth best on record for the month of September in Greater Boston. The last time home sales fell for nine consecutive months was December 2007August 2008.

• The monthly median selling price for single-family homes decreased in September for the first time in 24 months, slipping 2.5 percent on an annual basis from a median price of $502,500 last September 2013 to $490,000 in September 2014. The median price also dropped on a month-to-month basis by 9.2 percent from an upwardly revised price of $539,900 in August. While this price decline reflects a slower sales pace and softening demand over this past summer, it should be noted that the September 2013 median selling price was the highest ever recorded for single-family homes during the month of September in Greater Boston.

Furthermore, even though the monthly median selling price has declined each of the past three months since reaching a new all-time high of $576,000 in June, the median price for single-family homes rose nearly 3 percent during the 2014 third quarter compared to the same period last year, climbing from $520,000 in the third quarter a year ago to $535,000 in the same three-month period this year. Even more impressive, the September median selling price of $502,500 is still up 43.6 percent from March 2009, when home values bottomed out at $350,000 during the recession.

Its clear both from the data and anecdotal observations from the field that buyers have become a bit more discerning in recent months, exercising more caution in negotiations and not overextending themselves financially to have an offer accepted. Still, September marks the nineteenth consecutive month in which the ratio of original list price to sales price received by sellers has stood at or above 95 percent.

• After observing 28 months of decreases over the previous two years, the average market time for homes sold increased for a third consecutive months in September. Single-family homes sold last month were on the market an average of 65 days, compared to 57 days in September 2013, and also increased on a month-to-month basis from an average of 55 days on the market in August 2014. This is the largest number of days on the market for homes to sell in five months and most since April 2014 when the typical home was listed on the market for an average of 81 days.
• After declining each of three previous months, pending home sales increased on an annual basis in September, climbing 10.8 percent from the same month last year to 922 homes placed under contract. On a month-to-month basis, pending sales also rose nearly 13 percent from August when a downwardly revied 817 homes went under agreement. These gains can be attributed to an influx of new inventory hitting the market, as the number of new lisings of homes for sale jumped sharply in September by more than50 percent (51.6%) on a month-to-month basis, and have improved in four of the past five months on a year-over-year basis, thus offering more opportunities for prospective home buyers.
• While the inventory of single-family homes for sale has showed some signs of improvement in recent months, supply remains well below historic norms, declining on an annual basis by 2.7 percent in September and by nearly 20 percent over the past 24 months. Its the thirty-fifth time in the past 36 months the number of homes listed for sale has dropped from the same month one year earlier, and with 2,939 listings on the market as of September 30 the supply of homes for sale entering October is at its lowest level in more than a decade. On a month-to-month basis, the number listings improved modestly by 4.3 percent from an upwardly revised 2,818 homes on the market at the end of August.

Meanwhile, the inventory of homes for sale as expressed in months of supply improved on an annual basis from 3.3 months of supply in September 2013 to 3.5 months of supply this September. The improvement was even more pronounced on a monthly basis (as there was just 2.2 months of supply in August), and is now at its highest level since April when there was 4 months of supply. That said, a balanced market occurs when 7.5 8.5 months of supply exists, so at the current sales pace there is 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 fifth consecutive month in September, dropping 9 percent (or 80 units) in the past 12 months to 807 condos sold this September. This is the first time sales have decreased for five consecutive months on a year-to-year basis since JanuaryMay 2011. Despite the more moderate sales pace, this Septembers sales volume is the four highest on record for the month in Greater Boston, topped only by September 2005 (945 sales) September 2004 (896 sales), and September 2013 (887 sales). To no surprise given the seasonal nature of the local housing market, condominium sales also slowed on a month-to-month basis, declining 25 percent from an upwardly revised 1,079 units closed in August. For the entire third quarter, condo sales fell 11.4 percent, from 3,416 units sold in the three months from July September 2013 to 3,025 in the comparable quarter this year.
• The median selling price for condominiums rose on an annual basis for a nineteenth consecutive month in September, increasing nearly 5 percent over the past 12 months to $430,000 to set a new record high median price for the month of September in Greater Boston. That tops the previous high median price for the month set a year ago when the median selling price was $410,000. The last time the median selling price for condos rose for 19 straight months on a year-to-year basis was June 2004 December 2005.

Interestingly, for the summer quarter, the median selling price for condos also appreciated by 5 percent, from $409,375 in the third quarter last year to $430,000 in the three months from July - September 2014.

Like the single-family home market, the condominium market continues to suffer from a lack of listings to meet current buyer demand, especially at the entry-level end of the market. As a result, sellers are profiting. In fact, the percentage of original list price to selling price reached or exceeded 99 percent for a sixth consecutive month in September, meaning the typical condo owner was able to sell their unit either at or just below the full original asking price.

On a month-to-month basis, the median selling price was essentially stable compared to August ($429,931), and thus remains up a nearly 60 percent (59.3%) 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 fourth consecutive month in September, increasing modestly by 2 days since last September to 51 days on the market in September 2014. Average market time also increased on a month-to-month basis from an average of 50 days in August, offering further evidence that the shortage of listings and record high prices are hindering buyers ability to enter the housing market. This is the largest number of days on the market for homes to sell in five months and most since April 2014 when the typical home was listed on the market for an average of 57 days.
• The number of condominiums placed under agreement increased on an annual basis for the first time in three months during September, climbing nearly 7 percent from 781 units placed under contract in September 2013 to 834 units this past September. Pending sales rose even more sharply on a month-to-month basis, jumping nearly 20 percent from a downwardly revised 696 units put under contract in August. Its just the third time this year that pending sales have improved on an annual basis, and is the first time in over a decade that pending sales activity during the month of September has exceeded 800 units placed under agreement.
• The number of condos on the market declined for a thirty-eighth consecutive month in September, declining 25.5 percent over the past 12 months to 1,483 condos for sale, and by more than one-fifth (21.3%) since September 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 18 of the past 21 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 2.2 month supply in September 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.