August 2015 Greater Boston Real Estate Market Trends Report

The Single-Family Home Market:

• After declining during three of the first five months of the year, sales of detached single-family homes improved on an annual basis for a third consecutive month in August, increasing 13.5 percent, from 1,516 homes sold last August to 1,720 in August 2015. Last months sales volume is the most ever recorded for the month of August in Greater Boston, surpassing the previous record of 1,694 homes sold in August 2013, and the eighth highest single month sales total on record. The last time monthly home sales increased by a larger percentage rate on a year-over-year basis was September 2013, when sales jumped 28.6 percent over the same month one year earlier.

Home sales did cool on a month-to-month basis, declining nearly 10 percent from an upwardly revised 1,909 homes sold in July, but notably Julys sales total is the second highest ever recorded for a single month in Greater Boston.

The healthy sales pace of late can be attributed to steady job growth and the overall health of the local economy, near record low mortgage rates, and recent improvement in household formation. This years severe winter weather also delayed the start of the traditional spring market, resulting in a higher than normal closing activity over the summer months.

• The median selling price for single-family homes rose for an eleventh consecutive month in August to a new record high price for the month of August of $499,900. This reflects an increase of 2 percent over the previous high price set just a year ago when homes sold for a median price of $490,000 in August 2014. The median selling price for single-family homes has now increased on an annual basis in 34 of the past 35 months (dating back to September 2012). The median selling price decreased on a month-to-month basis however, sliding 4.8 percent from a median of $525,000 in July, due in part to a sizeable decline in activity in the luxury market, where homes priced at $1 million or more fell by nearly one-fifth (17.5%) between July and August.

Nonetheless, the current median selling price 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. These conditions favor sellers, as evidenced in the ratio of original list price to sales price which increased steadily over year ago levels to 98.2 percent in August, making it the thirtieth (30) 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 August, the median price is up 61 percent from March 2009 when home values bottomed out at $309,950.

• After declining for the first time in 13 months during July, the average market time for homes sold in Greater Boston inched up again last month, as the limited supply of homes for sale continues to present challenges for prospective home buyers. On an annual basis, the average market time for homes sold rose by one day to an average of 61 days in August 2015, while on a month-to-month basis the listing time increased by a week from an average of 54 days on market for homes sold in July.
• Pending home sales rose for a fifth consecutive month on an annual basis during August, increasing nearly 31 percent over the past 12 months from 995 homes placed under contract last August to 1,302 homes that went under agreement in August 2015. The 1,302 pending sales recorded this August sets a new record high for the month, topping the previous high of 1,245 homes put under contract in August 2004. On a month-to-month basis, pending sales did decline a modest 5.6 percent from a downwardly revised 1,380 single-family homes put under agreement dring July.
• The inventory of single-family homes for sale continues to trail historic norms, declining on an annual basis b 13 percent, or over 500 properties, compared t the same month last year. On a month-to-month basis, the supply level also decreased though more modestly so, declining 8 percent from an upwardly revised 3,818 single-family properties in July. With 3,500 homes listed for sale as of August 31, the supply of homes on the market is at its lowest level for the month of August in more than a dozen years.

Exacerbating the problem, the number of new listings coming onto the market in August declined 15 percent, or 270 units, from the previous month, while on annual basis new listings improved by 14 percent but the gain was fewer than 180 units. As a result, the few new listings coming on market will do little to improve conditions for buyers, ensuring the seller market will continue into the fall.

Inventory as expressed in months of supply also declined last month to 2.0 months from 2.7 months of supply in August 2014 while remaining stable from July. In a balanced market 78 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 increased on an annual basis for a third consecutive month in July, climbing 4.6 percent from 1,138 condos sold last August to 1,190 in August 2015. This follows seven consecutive months of sales declines from November 2014 May 2015. Last months sales total is the seventh highest on record for the month, but well off the monthly high of the 1,462 condos sold in both August 2004 and August 2005. Similar to the single-family home market, condominium sales declined 11 percent on a month-to-month, from an upwardly revised 1,338 units sold in July.

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.

• The median selling price for condominiums rose steadily on an annual basis last month, increasing nearly 10 percent from a median price of $419,000 in August 2014 to an all-time high monthly median of $460,000 this August. Notably, this marks the second consecutive month that the condo median price has hit $460,000, thus while flat from July the median selling price for condominiums has never been higher than it was during July and August 2015. This marks the tenth consecutive month and twenty-ninth time in the last 30 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.

The last time the median selling price rose by a greater percentage than the 9.8 percent gain between August 2014 and August 2015 was this past April, when the monthly median selling price improved 10.8 percent from the same month one year earlier. Since the monthly median price bottomed out at $259,500 in January 2009 during the last market correction, the median condo selling price has climbed 77 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, August marks the fifth consecutive month the ratio of list price to sale price has stood at or above 100 percent meaning the typical condo owner was able to sell their unit either at or above the full original asking price.

• The average market time for condominiums to sell decreased on an annual basis for a seventh time in the last eight months in August. The typical condo sold in August was listed for 46 days before an offer was accepted, which is down by nearly one week (6 days) from last August when the average days on market was 52 days. Meanwhile, on a month-to-month basis average days on the market increased from 41 days in July due to an insufficient inventory of available units to meet buyer demand.
• The number of condominiums placed under agreement rose for a sixth consecutive month in August, increasing nearly 17 percent over the past 12 months to 842 condos placed under contract this August. However, on a month-to-month basis, pending sales fell to their lowest level in six months, declining 13 percent from a downwardly revised 967 condos put under agreement in July.
• The number of condos on the market decreased for a forty-ninth consecutive month in August, declining 13.8 percent over the past 12 months to a little more than 1,500 condos for sale, and by nearly one-quarter (24%) since August 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 1.3 month supply of condos available for sale, which is down from a 1.5 month supply in August 2014 and stable from one month earlier. 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.