January 2015 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes were essentially flat in January, increasing by 0.3 percent, or two units from the same month one year ago to 617 homes sold in January 2015. Despite a depleted inventory of homes for sale, demand remained steady thanks to near record-low mortgage rates, a strengthening labor market, and more temperate weather over the final quarter of the year compared to one year earlier. While the January sales volume was the lowest in the past 10 months, dating back to March 2014 when 587 homes sold, it is the tenth highest January sales total on record and second best January sales total in the last eight years (exceeded only by January 2013 when 628 homes sold).
• On a month-to-month basis, sales fell 35.4 percent in January from an upwardly revised 955 homes sold in December. The decrease was not unexpected as demand traditionally drops from December to January due to holiday-related activities and the seasonal nature of the local housing market. In fact, last months sales decline is comparable to those in the five prior years when sales fell 31.7% 22.9%, 29.6%, 37.5%, and 35.2% in January from one month earlier.
• The monthly median selling price for single-family homes rose for a fourth consecutive month on an annual basis in January, increasing 8.4 percent from a median price of $455,000 last January to $493,000 in January 2015. The median home price has now increased on an annual basis in 27 of the past 28 months (dating back to September 2012).

The median selling price did decline modestly on a month-to-month basis by 1.4 percent from a median of $499,900 in December. However, last months median home price of $493,000 is the still the highest ever recorded during the month of January in Greater Boston, reflecting todays tight inventory levels and improved optimism about the economy and housing market. Notably, January marks the twenty-third consecutive month in which the ratio of original list price to sales price received by sellers has stood at or above 95 percent.

As of January, the median selling price is up nearly 41% from March 2009, when home values bottomed out at $350,000 during the recession.

• After declining for 28 consecutive months from March 2012 June 2014, the average market time for homes sold has now increased for seven consecutive months in Greater Boston. Single-family homes sold in January 2015 were on the market an average of 89 days, or roughly one and a half weeks longer than last January when the typical home sold in an average of 78 days. Market time also increased a full two weeks on a month-to-month basis from an average of 75 days in December. This reflects the largest amount of listing time for a home to sell in 11 months, dating back to February 2014 when the typical home was listed on the market for an average of 92 days.
• Pending home sales increased on an annual basis for a fifth consecutive month in January, climbing 26.7 percent from the same month last year to 670 homes placed under contract. Its the largest percentage increase in pending sales activity in nearly 2 years, dating back to September 2012 when the number of homes placed under agreement improved 31 percent from the comparable month one year earlier. On a month-to-month basis, pending homes also increased, gaining 18.6 percent from an upwardly revised 565 homes placed under contract in December.
• The inventory of single-family homes for sale continues to trail historic norms, declining on an annual basis by 15.6 percent in January and by nearly one-third (29.6%) in the past 24 months. Its the thirty-ninth time in the last 40 months the number of homes listed for sale has dropped from the same month one year earlier, and with just 1,714 listings on the market as of January 31 the spply of homes for sale is at its lowest level in more than a decade.

On a month-to-month basis,the supply level also decreased 10.7 percent from an upwardl revised 1,919 homes on the market at the end of December. This occurred despite the fact that the number of new listings coming on the market increased nearly 70 percent in January to 753, from 445 one month earlier. This data offers clears evidence that there is not a sufficient amount of inventory to keep up with buyer demand, as permitting for new homes remains low and current homeowners are reluctant to list their home for sale either because they owe more on their mortgage then their home is worth or they are fearful of not being able to find another home to purchase due to the lack of homes for sale.

Inventory as expressed in months of supply also declined to 2.8 months in January from 3.3 months of supply in January 2014, but improved slightly from 2 months of supply in December. In a balanced market 7.5 8.5 months of supply exists, so at the current sales pace there is a woefully insufficient supply of homes available to meet buyer demand.

The Condominium Market:

• Sales of condominiums declined on an annual basis for a third consecutive month in January, sliding 18 percent, from 540 condos sold last January to 440 in January 2015. This marks the eighth time in the past nine months activity in the condo market has fallen from year ago levels, and its the largest percentage drop in condo sales on an annual basis since April 2011 when sales decreased 19.7 percent from the same month one year earlier. Despite the slower sales pace, last months closing total still ranks as the tenth highest January sales total on record, and is the third best over past eight years, (exceeded only by the previous two Januarys when 540 and 520 sales occurred respectively.)

Of little surprise, condominium sales also fell on a month-to-month in January, declining 43.8 percent from an upwardly revised 783 condos sold in December. In spite of this traditional seasonal slowdown, demand for condos remains strong, especially among entry-level buyers look to convert from renting to home ownership, overseas investors, and suburban empty-nesters looking to downsize or relocate to Boston. Indeed, sales activity would likely be higher if not for the very limited supply of condos available for sale in eastern Massachusetts.

• The median selling price for condominiums increased on an annual basis for third consecutive month in January, climbing nearly 10 percent over the past year from $413,750 last January to a new all-time high monthly median price of $454,750 in January 2015. Its the largest percentage increase in the median price on an annual basis in nearly a year, dating back to February 2014 when the median price rose 14.3 from the same month one year earlier. Its also the twenty-second time in the last 23 months the monthly median price has risen from the same month one year earlier the lone aberration occurring last October when the median price slid a modest 1.3 percent from the same month the previous year due to a higher concentration of high-end properties being sold in October 2013 as compared to October 2014.

On a month-to-month basis, the median selling price also rose nearly 5 percent from a downwardly revised $433,500 in December. Since the monthly median price bottomed out at $270,000 in January 2009 during the last market correction, the median condo selling price has now risen 60.6 percent.

Like the single-family home market, the condominium market continues to be plagued by 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 98 percent for an twelfth consecutive month in January, meaning the typical condo owner was able to sell their unit either at or just below the full original asking price.

• After increasing each month from June November 2014, the average market time for condominiums to sell declined for a second consecutive month during January, decreasing by 4 days over the past 12 months to 59 days on the market in January 2015. However, thats up 5 days from the two previous months when the typical condo sold in an average of 54 days. Still, the time on market for condos sold in January is less than the quarterly average of 61 days on market observed during the past year in Greater Boston.
• The number of condominiums placed under agreement declined on an annual basis in January by 7 percent, decreasing from 603 units placed under contract in January 2014 to 560 units this January. On a month-to-month basis, pending sales did improve 26 percent from a downwardly revised 444 units put under contract in December, but that was the lowest monthly pending sales total of the past year, so does not represent a huge uptick in activity.
• The number of condos on the market declined for a forty-second consecutive month in January, declining 27.6 percent over the past 12 months to 991 condos for sale, and by more than one-third (39.3%) since January 2013. 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 remained persistently below 2,000 units for sale for 22 of the past 25 months. Unfortunately, it appears as though the situation is not going to improve any time soon. Even though the number of new listings coming on the market improved a healthy 84 percent between December and January, the 674 new condos listed for sale last month is still modest and a decrease of 10 percent from the previous January. At the current sales pace there is a 2.3 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 December 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.