May 2015 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• Sales of detached single-family homes decreased on an annual basis for a third consecutive month in May, declining nearly 11 percent, from 1,206 homes sold last May to 1,074 in May 2015. Its the lowest sales total for the month of May since 2011 when 960 homes were sold, and well below the record sales total for the month set in May 2004 when 1,339 homes sold. Furthermore, the decrease in May home sales is the largest percentage drop in home sales on an annual basis since June 2011 when sales volume declined 13.3 percent from the previous June.

Notably, the decrease in the number of home sales closed in May was not unexpected. Since it typically takes 45-60 days for home sales transactions to be completed, last months sales volume is directly correlated with the heavy snowfall and cold temperatures that plagued the Boston area from late January through early March, hampering buyers ability to view properties and prompting many homeowners to delay listing their home for sale until the weather improved.

On a month-to-month basis, home sales did improve sharply by 37 percent from April, which is comparable to the past three years when sales rose between April and May by 40%, 44.4% and 33.3% in 2014, 2013 and 2012 respectively.

• The monthly median selling price for single-family homes rose on an annual basis for an eighth consecutive month in May to a new record high price for the month of May of $480,000. This reflects an increase of 3.4 percent over the previous high price set just a year ago when homes sold for a median price of $464,250 in May 2014. The median selling price for detached single-family homes has now increased on an annual basis in 31 of the past 32 months (dating back to September 2012).

On a month-to-month basis the median selling price also improved, increasing 2.1 percent from a median price of $470,000 in April. The steady increase in median selling prices reflects todays tight inventory levels, improved optimism about the economy and housing market, and pent-up demand from millennials looking to transition from renters to homeowners, as well as empty-nesters looking to downsize and cash in on strong gains in their homes value in recent years. Notably, the ratio of original list price to sales price increased steadily over the previous month and year ago levels to 98.8 percent in May, its highest level since June 2014 and the twenty-seventh 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 May, the median price is up 54.9 percent from March 2009 when home values bottomed out at $309,950.

• After declining for 28 consecutive months from March 2012 June 2014, the average market time for homes sold has now increased for 11 consecutive months on an annual basis in Greater Boston. Single-family homes sold in May 2015 were on the market an average of 70 days, or five days longer than last May when the typical home sold in an average of 65 days. However, on a month-to-month basis, listing time declined sharply by nearly three weeks (20 days) from April when the typical home sold was on the market for an average of 90 days before an offer was accepted.
• Pending home sales set a new record for a single month during May climbing 16.6 percent, or nearly 270 units, from the same month last year to 1,885 homes placed under contract. This eclipses the previous monthly record high of 1,753 homes put under agreement in May 2013. Its the second consecutive month and third time in the first five months of 2015 that pending sales have risen on an annual basis. Pending sales also improved on a month-to-month basis in May climbing 15.3 percent from a downwardly revised 1,635 homes put under contract in April.
• The inventory of single-family homes for sale continues to trail historic norms, declining on anannual basis by 16 percent, or more than 650 properties, compared to the same month last year. With 3,491 homes listed for sale as of ay 31, the supply of homes on the market is at its lowst level in more than a dozen years.

On a month-to-month basis, the supply level did show modest improvement, with the number of homes for sale increasing 11.5 percent from an upwardly revised 3,130 single-family properties in April. However, the number of new listings coming onto the market only improved 4 percent, or just over 100 units, from the same month a year ago, and less than 2 percent from April. As a result, these gains will do little to improve market conditions given the current buyer demand, especially since permitting for new homes remains well below historic norms and many homeowners remain 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 last month to 3.3 months from 3.4 months of supply in May 2014 and 4 months of supply during April. In a balanced market 7.5 8.5 months of supply exists, so at the current sales pace there remains an insufficient supply of homes available to meet buyer demand.

The Condominium Market:

• Sales of condominiums declined on an annual basis for a seventh straight month in May, dipping 6 1/2 percent from 999 condos sold last May to 933 in May 2015. This marks the twelfth time in the past 13 months condo sales have fallen from year ago levels. Historically, last months sales total is the tenth best on record for the month, but well below Mays record of 1,271 units sold in May 2007. The last time fewer condos sold in May was in 2011 when 797 units closed.

Despite the slower sales pace in May, condominium sales still rose steadily on a month-to-month basis, improving by nearly 39 percent from an upwardly revised 672 condos sold in April. Notably, demand for condos remains strong, especially among entry-level buyers looking 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.

• Even as sales declined, the median selling price for condominiums increased on an annual basis for a seventh consecutive month in May, climbing 9.4 percent over the past year from $417,500 in May 2014 to a new record high median price for May of $456,900 this year. This marks the twenty-sixth time in the last 27 months the monthly median price has risen from the same month one year earlier the lone aberration occurring in October 2014 when the median price slipped 0.6 percent from the same month one year earlier.

On a month-to-month basis the median selling price also improved, but more modestly so, appreciating 4 percent. Since the monthly median price bottomed out at $259,500 in January 2009 during the last market correction, the median condo selling price has rebounded a remarkable 76 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 remained at 100 percent for a second consecutive month in May, making it the sixteenth consecutive month in which the ratio of list price to sale price has reached or exceeded 98 percent meaning the typical condo owner was able to sell their unit either at or just below the full original asking price.

• The average market time for condominiums to sell decreased on an annual basis for the fourth time in the last five months in May. The typical condo sold in May was listed for 46 days before an offer was accepted, which is lowest average days on market until sale this year, and down five days from last May and almost two weeks (13 days) from one month earlier when the average days on market was 59 days.
• The number of condominiums placed under agreement rose for a third consecutive month in May, increasing nearly 20 percent, or roughly 225 units, over the past 12 months to 1,351 condos placed under contract this May. In addition, on a month-to-month basis, pending sales inched up 4 percent from a downwardly revised 1,295 units put under contract in April. The number of condos put under agreement in May 2015 is the most of any month in nearly 10 years, dating back to June 2005 when 1,403 condos went under agreement, thus illustrating the strong demand for condominiums in the Greater Boston market.
• The number of condos on the market decreased for a forty-sixth consecutive month in May, declining 16.7 percent over the past 12 months to just under 1,700 condos for sale, and by more than one-quarter (27%) since May 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 much of the past two years. At the current sales pace there is a 1.8 month supply of condos available for sale, which is down steadily from a 2.0 month supply in May 2014 and 2.4 month supply in April 2015. As a result, 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.