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Goode and Farmer Report – Boston April 2013

 Lack of Inventory – Still the Challenge

The Big Number is 45%. Combined, all Boston neighborhoods saw a 45% decrease in inventory of condos for sale as of March 30 compared last year at this time.  This decrease in inventory didn’t seem to effect sales as the average sale price went up 10% to $611K vs. $556K and the number of condo sales increased 3% to 644 units from 624. The median sales price increased 4% to $416K from $400K in 2012. On first glance this real estate market seems very healthy but a continuing decrease in inventory levels could create a problem going forward.

The Back Bay saw a 1% increase in condo sales to 74 units from 73 in 2012 while the average price of a condo sold increased by 12% to $1.489M. The number of condos available for sale dropped 50% from 183 last year to only 92 today.

The South End saw an 8% increase in the number of condo sales to 85 condos sold year to date compared to 79 last year. The average price of a condo sold increased 18% to $763K compared with $646K last year. The inventory of condos for sale decreased 57% from a very low 130 last year to a terrifying 56 today.

South Boston saw a 4% decrease in the number of condo sold to 80 in compared with 83 in 2012. The average sales price of a condo increased by 8% to $444K compared with $410K in 2011. The inventory of condos for sale dropped 49% from 154 in 2012 to 79 condos for sale today.

This market is so resilient and so desirable that declining inventory levels have not negatively affected the steady increase in sales and prices, although these increases have slowed somewhat. Spring will tell just how resilient the market is to very low inventory.

 

Boston Q1

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Big Leap In Spring Sales

South End Heli ShotMarket resilience to low invent0ry levels is surprising, but as Scott reports sales continue to increase.

Posted by Scott Van Voorhis  April 9, 2013 06:44 AM

Will dwindling listings derail the real estate recovery?

At least for now, the answer is no.

The number of pending sales across the state jumped 4.6 percent in March compared to the same time last year, the Massachusetts Association of Realtors reports.

In fact, the 4,308 homes put under agreement was the best showing since March 2005, at the height of the real estate bubble, when buyers laid claim to 4,404 homes.

That’s just a percentage or two difference.

Pending condo sales also took a big jump in March, surging 9.4 percent to 1,888.

Given the number of homes and condos for sale is down roughly a quarter from this time in 2012, buyers are clearly biting the bullet and taking the plunge anyway.

There’s certainly anecdotal evidence of homes that couldn’t sell last year being put on the market and getting offers now.

Buyers are looking past flaws that might have been deal breakers before and likely paying more as well.

And there’s some hard evidence as well.

Home prices in Greater Boston moved up 10.6 percent in February, slightly above the national average, the Boston Business Journal notes in this post on the latest CoreLogic report.

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Why Is Inventory So Low?

Excerpts taken from a great post by Mike Simonsen of Altos Research.

 Three Reasons Why Housing Inventory is So Low

 by MIKE SIMONSEN

There’s no question about it, the operative theme of the 2013 housing market isrestricted supply. Ever since the bubble burst in 2006, we’ve been hearing about the dangers of over supply, of the massive “shadow inventory” out there. Yet we’re living in a vastly different reality. There are 40% fewer homes on the market now than there have been during February in the last few years.

Percent of homes with Price ReductionsInventory of actively for sale homes. Single Family Homes. Altos 20-city (national) composite. Data as of February 22, 2013. Source: Altos Research

Mid-January typically marks the seasonal low of available housing inventory. The fewest homes are on the market after the holidays. But pretty quickly they start coming on the market to prepare for spring. Inventory gets added until the first week of July, when people start looking forward to the Autumn.

Last week we commented about the rising prices that have resulted from this restricted supply. Imagine what would happen to the price of oil if Saudi Arabia, Russia, The US, China, Iran, and Canada were all offline.  It’s a, ahem, crude analogy, because housing is less a commodity than oil. But the fact is, we’re facing unprecedented few homes available for sale.

Why is that? What happened to all this “Shadow Inventory” that was going to dump on to the market?

You can boil the low-inventory reality down to three primary factors:

1-Under-Construction

Since 2007, new housing starts have been anemic. The long-term average construction rates are about 1.5MM homes per year. In the last six years, we’ve averaged well under 1MM. And since 2009, the average is closer to 500,000. Meanwhile population and household formation keeps on trucking. The over-construction that happened in the bubble is a distant memory. See the chart to the right. Construction volume under the orange line are “undersupplied” conditions. The homebuilders imploded so profoundly after the bubble, that we haven’t had this few new homes being built since 1959.

Expect this trend to continue for several more years. It’s difficult to ramp up housing production quickly. And we’re a long way below normal.

Percent of homes with Price ReductionsInventory of actively for sale homes. Single Family Homes. Altos 20-city (national) composite. Data as of January, 2013. Source Census Bureau viathemortgagereports.com

2-The Reverse Shadow Inventory Dynamic

Rising home prices have led to fewer, not more, existing  homes coming on the market. You might call this, ironically, the “Reverse Shadow Inventory” dynamic.

When the Shadow Inventory meme emerged during the bubble, the bearish argument followed: As soon as home price tick back up, there are going to be millions of people (and banks) who want to unload. Therefore supply will rise and prices will fall again.

In actuality, it seems the psychology has been reversed: As prices have climbed, those who (still) own their underwater homes finally see light at the end of the tunnel. The longer they hold, the closer they are to recovery. Why sell now if you don’t have to? Maybe you’ll make it out alive!

Banks are acting similarly. The owners of underwater mortgages have no incentive to unload quickly. Their assets are appreciating. Furthermore, as home prices increase, fewer and fewer people are at risk of default. The Shadow is shrinking in the noon-day sunshine of rapidly re-inflating home values.

3-Government Policy

Finally, it is no coincidence that essentially all housing policy, all programs, laws, and incentives have been focused on stimulating demand and restricting supply. The Fed is aggressively keeping interest rates low. HARP, HAMP and related mortgage crisis programs are designed to keep people in their homes. They have been successful. Politically, it’s near impossible to institute a program that might help home buyers. For whatever reason, the bureaucrats are much more fond of home owners. That’s unlikely to change.

We’re in a hangover of short supply after the burst bubble. Low new construction, low incentive for existing homes to sell, and a government that wants people to stay put. Like a good hangover, these are long, slow, painful conditions.  We’ll ease slowly out of the fog in the next few seasonal cycles.

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February MAR Report

 The Massachusetts Association of REALTORS® (MAR) reported today that February pending home sales were positive for the 22nd straight month compared to the year before, but winter weather kept gains modest. Pending sales figures (also called homes under agreement) are a leading indicator of actual housing sales in Massachusetts for the following 2-3 months.

“While we were still in positive territory, the combination of low inventory and several weekends snow storms, including a blizzard, kept buyer activity relatively minimal in February,” said 2013 MAR President-Elect Peter Ruffini, regional vice president at Jack Conway REALTORS® in Norwell. “After a ‘non-winter’ in 2012, the fact that pending home sales were still up in February is a good sign for the market.”
The number of single-family homes put under agreement in February was up 1.1 percent compared to the same time last year (3,041 homes in 2012 to 3,075 homes in 2013). This is the 22 nd straight month of year-over-year increases. On a month-to-month basis, single-family homes put under agreement were flat compared to 3,076 homes put under agreement in January 2013.
The number of condos put under agreement in February was up 11.9 percent compared to February 2012 (1,146 units in 2012 to 1,282 units in 2013). This is the 22nd straight month of year-over-year increases. On a month-to-month basis, condos put under agreement went UP 5 percent from 1,216 units in January 2013.

 

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Buying Cheaper Than Renting

Another great post from Tara Steele at Agent Genius. Buying is still cheaper then renting in most markets. An interesting national story.

by  in Housing News –   

 

trulia Buying now cheaper than renting in most housing markets

Rents up, home prices up, one still reigns

According to the Trulia Winter 2013 Rent vs. Buy Report, buying a home in the top 100 major metros is cheaper than renting, even in light of home prices rising. The company analyzes homes for sale and rent on the site from December 1, 2012 to February 28, 2013 factoring in transaction costs, opportunity costs, and taxes to uncover that although rents and home prices are both rising, home ownership is still more affordable. Trulia says buying a home is 44 percent cheaper than renting nationwide, down just slightly from 46 percent in 2012.

“Although buying a home is still cheaper than renting, the gap is closing,” said Dr. Jed Kolko, Trulia’s Chief Economist. “In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”

Housing affordability and mortgage rates

Asking home prices rose 7.0 percent year over year in February, which outpaced rents which rose 3.2 percent in the same period. Trulia reports that low mortgage rates (averaging 3.5 percent at the end of February) have kept homeownership costs from rising, and kept affordability high.

“Even in each of the 100 largest metros, buying is more affordable than renting with the range differing significantly from being 70 percent cheaper to buy than rent in Detroit, but only 19 percent cheaper in San Francisco,” Trulia reports.

The challenge that remains for housing

While a positive portrait of homeownership emerging, the stark reality is that many potential home buyers still won’t qualify for a mortgage under current lending conditions, and those that do qualify may not enjoy the lowest of rates unless their credit is near perfect.

That said, Trulia notes that “getting a higher rate does not mean homeownership is completely out of reach. Even with a 5.5 percent mortgage rate, buying a home is still cheaper than renting in almost every market. Only in San Francisco does homeownership become slightly more expensive than renting at the higher rate.”

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Two Recent Truro Sales

6 Cooper Terrace $915K

These two recent Truro sales represent an interesting and diverse segment of the Truro single family home market. New houses, one brand  new and one built in 2002 illustrate the quality of homes available and the  great value available in Truro . 6 Cooper sold at $446 per square foot while 56 Castle Road sold at $257 per square foot. I know that most buyers, sellers and agents on the Cape don’t often use per square foot price as an important indication of value, but I just cant stop myself from using as it was embedded in my city training.

6 Cooper Terrace $915K

6 Cooper Terrace a 3 bedroom 2 bath 2,048 sf house sold for $915K on February 25 . (from MLS) Enjoy privacy and views of Cape Cod Bay and the Hopper house from this outstanding, architect designed contemporary built in 2002. The great room with soaring windows, including living and dining areas with an open kitchen, is on the first floor. The first bedroom and bath are also on the first floor while the second bedroom and bath, as well as a sleeping loft overlooking the great room, are on the second floor. There is a screen porch and patio off the first floor, and a deck looking out to the bay off the second floor. There is also a large outdoor shower. This home has a four-bedroom septic and sits on 1.42 acres, ample acreage for a guest cottage and/or additional bedrooms in the house.

 

 

 

 

56 Castle Road $722,500

56 Castle Road a 4/3, 2,808 sf house sold for $722,500 on March 1. (from MLS) Spacious brand new contemporary in a terrific Castle Rd., location. This brand new home is well sited to afford nice privacy with lovely natural views and vistas of the marsh. Open airy feel to the main living level with vaulted ceiling and over sized sky lights.In addition there is a master bedroom with bath and an added guest room. Full social bath.Lower level has 2 additional bedrooms,huge family room with sliders for extra light and 1-1/2 baths.All living areas and bedrooms are generously sized. There is a very large wrap around deck for outside living. Great home for large families, friends and parties. Super rental potential!

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January Sales At Highest In Five Years.

News from The Warren Group:

Bay State January Home Sales At Highest Level In Five Years

Condo Sales Break 1,000 Mark For First Time Since 2008

The Warren Group

The strong sales trend in January in just the beginning of a hot spring selling season. Timothy M. Warren Jr., CEO of The Warren Group, weighs in.

Single-family home sales in Massachusetts rose more than 10 percent in January to 2,680, reaching the highest level since 2007, according to new data from The Warren Group, publisher of Banker & Tradesman.

January home sales in the Bay State were up over last year’s 2,436 sales. This is the highest January sales volume for single-family homes in Massachusetts in five years, when there were 2,953 transactions in January 2007.

Jan2013MASalesChart

We ended 2012 on a pretty positive note, and this is carrying into January,” said Timothy M. Warren Jr., CEO of The Warren Group. “Recent pending sales data are a hopeful sign for a strong spring market. And given low mortgage rates and steady prices, there are positive signs that 2013 will be a second year of recovery.”

The median sale price of single-family homes in Massachusetts increased for the fourth consecutive month in January. Median sale prices rose 6.8 percent in January to $277,750, up from $260,000 in January 2012. This is the highest median home price for January in three years.

“Low inventory is slowly driving up prices. This should in turn give sellers more confidence to put their homes on the market,” Warren said.

Condominium sales statewide also rose in January, increasing almost 11 percent to 1,006 from 907 in January 2012. This is the first January since 2008 where home sales broke the 1,000 mark.

The median condo price in January slipped almost 2 percent to $240,000 from $244,500 in January 2012. This is the lowest price for condos statewide since 2009, when the median price was $209,900.

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WSJ Calls A Sellers Market

Below is Nick Timiraos’s article in the Wall Street Journal. We are certainly seeing different degrees of this dynamic in our local markets.

Housing: It’s Becoming a Seller’s Market

By Nick Timiraos
National Association of Realtors

The National Association of Realtors said on Thursday what home buyers in many parts of the United States have known for months: it’s becoming a seller’s market.

The number of homes listed for sale in January fell by 4.9%, leaving 1.74 million properties on the market. That’s the lowest since December of 1999, when there were 1.71 million homes on the market. By contrast, there were 2.91 million homes on the market two years ago at this time.

After adjusting for seasonal factors, home sales rose by just 0.4% in January, to an annual rate of 4.92 million units. Still, that’s up from 9.1% one year ago.

The upshot is that there’s a growing pool of buyers chasing a shrinking supply of homes. If the trend holds, prices will keep going up. At the current pace of sales, it would take just 4.2 months to sell the current supply of homes available for sale, down from a 6.2 months’ supply one year ago.

While inventories typically increase in the spring, the Realtors’ group has expressed growing concerns that sales volumes are being held back by the lack of choice. This is good news for homeowners who have watched home prices drop over the last six years, but it’s bad news for buyers—and for anyone that makes their living selling real estate.

Inventory declines have been the most dramatic in California, Arizona, and other markets that witnessed some of the largest home price declines. Those cities have large numbers of underwater borrowers—people who owe more than their homes are worth—while many others may have equity but aren’t willing to sell because prices have fallen so far.

Investors have also been aggressive in buying up properties that are selling for less than their replacement cost.

National Association of Realtors

Home sales could rise to 5.2 million units this year, an increase of nearly 12% from last year, according to economists atGoldman Sachs GS +2.13%. They base their forecast on household formation and demographics, which both suggest rising demand for housing in the coming years, and affordability measures such as mortgage rates and home prices.

But the economists note that there’s a considerable amount of uncertainty that could make those targets hard to hit, particularly if there’s nothing for would-be buyers to purchase.

Follow Nick @NickTimiraos

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Sales Edge Up In ‘Sellers Market’

USA TODAY article indicating national trend of sales being affected by low inventory.  Local implications will be explored in later posts.

Ray Goldbacher, USA TODAY10:32a.m. EST February 21, 2013

Sales of previously owned homes edged up in January, held back by a shortage of homes for sale, according to the National Association of Realtors.

Single-family home sales increased 0.2% to a seasonally adjusted annual rate of 4.34 million in January vs. 4.33 million in December, and 8.5% above the 4 million-unit level in January 2012.

The median single-family home price was $174,100 in January, up 12.6% from a year ago.

Lawrence Yun , NAR chief economist, said tight inventory is a problem and, as a result, “We’ve transitioned into a seller’s market in much of the country.”

“Buyer traffic is continuing to pick up, while seller traffic is holding steady,” he said. “In fact, buyer traffic is 40% above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly.”

Homes available for sale at the end of January fell 4.9% to 1.74 million previously owned homes, a 4.2-month supply at the current sales pace, down from 4.5 months in December, and the lowest supply since April 2005, when it was also 4.2 months, the NAR said.

The inventory is 25.3% below a year ago, when there was a 6.2-month supply. The number of homes available for sale is at the lowest level since December 1999, when there were 1.71 million homes on the market, the Realtors said.

“We expect a seasonal rise of inventory this spring, but it may be insufficient to avoid more frequent incidences of multiple bidding and faster-than-normal price growth,” Yun said.

Sales rose in every region but the West.

Overall, sales of single-family homes, condos and townhouses were up 0.4% from December, at a seasonally adjusted annual rate of 4.92 million. That was up from a downwardly revised 4.90 million in December, and 9.1% above the 4.51 million-unit pace in January 2012.

Distressed homes — foreclosures and short sales — accounted for 23% of January sales, down from 24% in December and 35% in January 2012.

The median time on market for all homes was 71 days in January, down from 73 days in December and 28.3% below 99 days in January 2012.

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What’ s Keeping Sellers From Selling?

As we are all assessing the outlook for the spring market, Scott at Boston.com has some good points, and while this post is based on national polls, we are hearing the same thing in our marketplaces.  Sellers wonder if they do list and sell there propertry, will there be anything decent to buy! An important question as we move into the spring selling season.

 

 

 

Really, why shouldn’t sellers wait for higher prices?

Posted by Scott Van Voorhis

That’s the question many potential home sellers are asking as they watch prices climb again in an increasingly tight market.

Would-be home sellers, as they consider taking the plunge, are no longer primarily concerned with the state of the economy in deciding whether to list their house now or wait. Instead, the top concern now is whether by selling now, they will pass up even bigger gains down the line if they should choose not to hold out for a few more months, Redfin reports in a new survey on seller attitudes.

It’s not that they are not interested in selling – just under half the more than 1,800 homeowners polled by Redfin said they were planning to sell, up from 45 percent in the fourth quarter. (Just to be clear, this was not a broad sampling, but rather a tally of homeowners who visited Redfin’s website.)

But 34 percent  of homeowners surveyed told Redfin that missing out on future gains was their biggest concern with diving in now, up from 30 percent at year end. Moreover, potential sellers are also growing increasingly bullish in their take on the market as well, with 81 percent now predicting more increases in home prices over the next year, up from three-quarters last fall.

Needless to say, with warmups beginning for the annual spring market, this is not a good sign. In fact, we could see some sellers sit out the spring market altogether, waiting to see if prices continue to rise. After that, we could see new inventory start to trickle on, but it seems unlikely at this point we are going to see an avalanche of new listings in the next few months.

That’s my bold prediction – feel free to jump on the comment board with your own take.

It’s certainly not what frustrated buyers, yearning for more listings to choose from, want to hear, but the market is what it is right now.

Of course, there are other factors at work here. Any broker will tell you another big concern of potential home sellers, especially here in the Boston, is the fear they won’t be able to buy anything decent if they go ahead and sell what they have now.

Not unreasonable given the precipitous drop in home listings, which fell by more than 25 percent in Boston alone over the past year, helping push prices up 4.1 percent, according to the Department of Numbers.

So why shouldn’t sellers keep holding out for more? Until buyers and brokers come with a better argument – or really any counterargument at all – sellers are likely to keep on watching and waiting instead of listing.