Tag: Boston sales outlook

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The Sky Is Not Falling

A perfect post by the incredible KCM crew. They do a great job highlighting assumptions around what is causing the national trend towards decreasing sales numbers, and then debunking them with Reality. We are seeing some of these dynamics in our local markets. This is a very good post with a broad national slant on the issues…for consumers and agent/brokers too.

Be Quiet Chicken Little. The Sky is NOT Falling

by 

There has been much speculation about what is causing the falling sales numbers in the most recent Existing Home Sales Reports (EHS) from theNational Association of Realtors (NAR). Some have claimed that rising interest rates have scared buyers out of the market. Others have claimed that consumers are just losing confidence in the housing recovery fearing a new bubble may be forming. We want to look at the validity of these two assumptions.

MORTGAGE INTEREST RATES

ASSUMPTION: Rising interest rates have forced buyers back onto the fence. Evidence offered up by those in this camp comes directly from the EHS Report from NAR. Three of the last four reports revealed that sales were below sales from the same month the previous year.

THE REALITY: Though it is true year-over-year sales have fallen nationally, a closer look at the report reveals major regional differences. Sales in the West Region are down 10.7% versus the same month last year. Sales in the Midwest Region are also down but by less than 1%. The Northeast Region is up 3.2% and the Southern Region is up 4.6%.

If the issue is interest rates, why is one region virtually unchanged and two of the remaining three regions up in sales? We don’t believe rates are the challenge.

CONSUMER CONFIDENCE in REAL ESTATE is ERODING

ASSUMPTION: The pace of the recent price increases has caused many to fear the emergence of a new housing bubble. Similar to the first assumption, evidence offered up by those in this camp comes directly from the less than enthusiastic EHS Reports from NAR.

THE REALITY: As we mentioned before, sales in the Midwest Region are down but by less than 1%. The Northeast and the Southern Region have both shown increased sales as compared to the year before. Are only the consumers in the Western Region afraid of a possible bubble forming?

The fear of a new housing bubble is vastly overstated. Forty states have not yet returned to home values they experienced seven to nine years ago. Nineteen of those forty states still have home prices 15% or more below peak prices. We believe home values will continue to increase but just at a slower rate of appreciation.

It is not just us that believe this is the case. The over 100 housing experts recently surveyed by Pulsenomics revealed that they believe prices will continue to appreciate at historical annual numbers (3-4%) for at least the next five years.

THEN WHAT IS THE CHALLENGE?

If the lack of sales is not the result of increasing interest rates or decreasing consumer confidence, what actually is happening? We believe it can be broken down to three words: LACK of INVENTORY.

Inventories of foreclosure and short sale properties are falling like a rock in the vast majority of regions across the nation. These two categories of homes have driven the market for the last few years. As foreclosures and short sales sell, they are not being replaced because the economy has gotten better and more families have regained control of their finances. All fifty states have seen a decrease in the number of homeowners who are seriously delinquent on their mortgage payments with thirty nine states seeing the number shrink by over 20%.

This inventory has not yet begun to be replaced by the non-distressed properties in the country. Just this month, NAR revealed that the months’ inventory of homes for sale has dropped to only a 4 month supply. A normal market has between 5-6 months’ supply.

This is the main reason home sales are declining in certain regions – there are just not enough houses for sale.

BOTTOM LINE

With the economy improving and with homeowners gaining back some equity they lost when prices fell, we believe there will be many homes coming unto the market this spring. A recent survey revealed that 71% of homeowners are at least considering selling their home in 2014.

If you are thinking of selling, beating this increased competition to the market before spring might make sense – and might enable you to get the best price possible for your home.

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Condo Prices Shatter Record

 

Great post from Scott.

Mass condo prices shatter record

Posted by Scott Van Voorhis
Yes, condo prices are getting nutty again.

The median price of a condo in Massachusetts crossed the $300,000 threshold in January.

That’s the highest condo price ever for a January since The Warren Group, publisher of Banker & Tradesman, began tracking condo prices back in 1987.

It also represents a 24 percent increase from January 2013, when the median price for a condo in the Bay State was at a relatively more affordable $242,000.

By comparison, the median U.S. home price weighs in at $188,900. And that’s after a 10 percent increase in January.

Condo sales were also up by a pretty sizable 16 percent, with 1,144 units changing hands the first month of the year, The Warren Group reports.

What’s even more amazing, condo prices are not all that far behind single-family home prices in Massachusetts, with the median home price in January rising 16 percent, to $315,000.

Condos have long been a starter home alternative in pricey Greater Boston, but it’s not clear how much longer that’s going to last given current trends.

Certainly condo prices are out of sight now in Cambridge, Boston and the inner suburbs.

Of course, the price increases might be good news for sellers, but it’s hardly anything for buyers to cheer about. Even if you are trying to sell a house in order to move up into something grander, you are still going to be scrambling to keep up when prices are rising at double digits.

So what’s driving this price escalation? Some of it is due to pent-up demand, but low inventory – basically not enough listings for all the buyers out there – is the bigger problem right now.

The inventory of single-family homes dropped more than 20 percent in January compared to January 2013, the Massachusetts Association of Realtors reports this morning. (There were 15,246 listings this past January, compared to 19,142 the year before.)

Condo inventory was down even more, by 27 percent, to 4,232, MAR reports.

Anyway, it should be an interesting spring market. At a time when sales and prices in many other parts of the country are starting to moderate, the market in Massachusetts kicking into high gear.

 

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Condos Soar

691 Mass Ave, #208, asking $570K. 1B/1B, 909 sf

Its always interesting to hear mixed reactions to condos, as our “local” markets, downtown Boston and Provincetown are very condo centric. A good statewide perspective though.

Condos soar as home sales stumble

Posted by Scott Van Voorhis
Are buyers turning to condos as they find themselves on the losing end of soaring single-family home prices?

It happened during the bubble years and in previous booms as well. And it looks like it may be happening again given the latest Massachusetts sales stats out this morning

Bay State condo sales jumped more than 15 percent in December compared to the year before, even as home sales slid –  by just under a percent –  for the fewest sales since April,The Warren Group reports.

Yet even as home sales faltered, home prices rose yet again in December amid a dearth of listings for buyers to look at, with the median price hitting $320,000, a 6.3 percent jump over 2012 and an increase over this November as well, the Massachusetts Association of Realtors finds.

And despite the stagnant sales numbers, demand still appears to be relatively strong, with the drop in sales driven by the sparse choices in the market as much as anything else.

Even as home sales stagnated in December, average days on market dropped to 99 days, down from 130 in December 2012, according to MAR.

By contrast, condo prices look a little more reasonable, though that window appears to be closing as well.

The median condo price rose 8 percent in December, to more than $305,000, MAR reports. The median condo price for all of 2013 – $300,000 – was the highest since 2004.

While generally less expensive, condos have the perception as being a riskier bet than singe-family homes. There’s more price volatility with condos the poster child, at least in New England, of the devastating early-1990s real estate collapse.

Many of those who snapped up condos during the greed-is-good 80s were stuck with them for years, unable to sell, period, let alone settling for a loss.

Developers during those heady boom times got the very dangerous idea they could turn any old building anywhere into overpriced condos and stuff their pockets with easy profits.

Bad bets include the downtown Haverhill condo next to a car dealership that one of my former newspaper colleagues was stuck with from his bachelor days.

He wound up renting it after he got married and bought a house – he may very well still be sitting on it, though I suspect he finally found a way to unload during the bubble years, circa 2003-2006.

Ready to go condo? Homes too expensive for you now?

 

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Goode & Farmer Report – Boston Year End 2013

 Goode & Farmer Report – Boston Year End 2013

January 15, 2014

The challenge remains lack of inventory.

The Big Numbers are 6, 8 and 44! Combined, all Boston neighborhoods saw a 6% increase in the number of condos sold in 2013 to 4,605 from 4,361 sales in 2012. The average sales price of condominiums increased 8% to $608K from $563K in 2012. Average days on market dropped 44% to an average of only 46 days from an already historic low last year of 82. This real estate market is healthy except for the continuing decrease in inventory levels. There are only 374 condominiums for sale in downtown Boston, a slight increase from the 347 last year at this time, but still a very low number.

The Back Bay, saw a 4% increase in the average sales price of a condominium to $1.228 from $1.18M. Total sales of condos were down 12% to 474 from 537 in 2012 with the average days on market down a remarkable 44% to only 59. There are only 58 condos available for sale in the Back Bay today.

The South End saw a 7% increase in the number of condo sales to 578 from 540 condos sold last year. The average price of a condo sold increased 14% to $802K compared with $704K last year. Total sales volume was up 22% to $463M. Interestingly there are only 28 condos for sale today.

South Boston saw an 8% increase in the number of condos sold to 630 from 585 in 2012. The average sales price of a condo increased by 10% to $467K compared with $423K in 2012. South Boston had the largest drop in average days on market to only 32. There are only 54 condos on the market today.

It is so evident that inventory remains the problem in all of the downtown Boston markets, but as I have said repeatedly this market is so resilient and so desirable that declining inventory levels have not  affected the steady increase in prices in most neighborhoods. Although in some neighborhoods like Beacon Hill sales have decreased 25% to 140 from 186 last year – due to the total lack of inventory available for sale. There are a total of only 6 condos for sale on The Hill. Time will tell if this dynamic continues. The addition of Ink Block and numerous other condominium projects just may signal an end to the seemingly endless lack of inventory.

 

Boston chart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I hope this clean and simple year end analysis of some favorite and important Boston neighborhoods has been interesting.

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Housing Recovery Still On Track…NYT

Excellent article with the national perspective.

By  New York Times
The housing market, one of the main drivers of the economic recovery, continues to gain strength despite the drag of rising mortgage rates and other economic headwinds, but some analysts are worried that it may slow in the months ahead.

For now, though, builders are building, sellers are selling and mortgage lenders are less nervous about extending credit to buyers.

The heady price increases in the first half of the year slowed a bit in July, according to data released on Tuesday.

But in the face of pent-up demand and emboldened consumers, home values were still heading upward at a healthy pace, rising 12.4 percent from July 2012 to July 2013, according to the Standard & Poor’s Case/Shiller home price index, which tracks sales in 20 cities.

A separate index of mortgages backed by Fannie Mae and Freddie Mac showed an 8.8 percent gain in prices over the same time period.

Two national homebuilders, Lennar and KB Home, reported significant revenue growth and profits in the third quarter. Lennar said its third-quarter earnings rose 39 percent over the third quarter of last year, and KB said its profit had increased sevenfold.

“We still have a lot of young people that are going to start moving out and forming households and we’re going to have to find housing for them,” said Patrick Newport, the chief United States economist for IHS Global Insight. “There are shortages of homes just about everywhere.”

Higher home prices help the economy not just by strengthening the construction and real estate industries, but by making homeowners feel wealthier and more likely to spend.

While the number of Americans who lost the equity in their homes in the housing crash set records, rebounding prices have helped nudge more and more households back above water. According to CoreLogic, 2.5 million households regained equity in their homes in the second quarter.

Mr. Newport said the full effects of higher mortgage rates had probably not shown up in the numbers yet.

Rates increased from about 3.4 percent on 30-year fixed-rate loans in January to about 4.4 percent in July, according to a survey by Freddie Mac, and many loans were written at even higher rates this summer. But they remain well below typical rates in recent decades, and mortgage borrowing costs have already eased a bit from their recent peak now that the Federal Reserve opted last week not to begin a wind-down of stimulus measures.

Rising rates may not torpedo the housing market recovery, but they have made refinancing much less appealing.

The number of mortgage applications for purchases has climbed by 7 percent over the last year, according to the Mortgage Bankers Association, but refinance requests have fallen by 70 percent since early May.

As a result, banks have laid off thousands of workers in their mortgage units. Citigroup laid off 1,000 workers from its mortgage business, it said on Monday, following Wells Fargo and Bank of America, which have both done layoffs in recent months.

Refinancing also gave households more spending power as it lowered monthly payments.

Analysts offered a cornucopia of reasons for the continuing strength of the housing market: people rushing to buy before prices and interest rates increased further, a gradual relaxation of lending standards, an uptick in inventory, a smaller share of foreclosures in the sales stream and large-scale buying by investors looking to put houses on the rental market.

Still, some analysts questioned whether fundamental factors like job and wage growth would sustain the market and restore first-time buyers to the market. Others warned of a lurking shadow inventory.

“While recent results have been considerably better than those seen earlier in the cycle, and also better than we had anticipated, we have not given up on the argument that a large supply overhang of existing homes (factoring in all those in foreclosure or soon to be) promises to keep pressure on prices for some time,” Joshua Shapiro, the chief United States economist for MFR, wrote in a note to investors.

Once the backlog of demand is absorbed, continued strength will depend heavily on consumer confidence. That’s where politics, including a looming battle over federal spending and the debt ceiling, could stall improvement.

“The real test will come over the next few months, given the sharp drop in mortgage demand and the potential for a rollover in consumers’ confidence as Congress does its worst,” wrote Ian Shepherdson, an economist with Pantheon Macroeconomics.

On Tuesday, the Conference Board, a New York-based private research group, reported that Americans’ confidence in the economy fell slightly in September from August, as many became less optimistic about hiring and pay increases over the next six months. The September reading dropped to 79.7, down from 81.8 the previous month, but remained only slightly below June’s reading of 82.1, the highest in five and a half years.

Year-over-year prices were up in all 20 cities tracked by Case/Shiller, but the gains varied widely, from 3.5 percent in New York and 3.9 percent in Cleveland on the low end to a frothy 24.8 percent in San Francisco and 27.5 percent in Las Vegas.

The month-to-month increase in the Case/Shiller index slowed to 0.6 percent, after gains of 1.7 percent in April, 0.9 percent in May and 0.9 percent in June.

Asked if the slowdown in growth was alarming, Robert Shiller, the Yale economist who helped develop the home price index, said no. “I’m not worried,” he said in an interview with CNBC. “I think that would be a good thing.”

His greater worry, he said, was “more about a bubble — in some cities, it’s looking bubbly now.”

Still, Mr. Shiller said, even the bubbliest markets were still well below their peak.

Other analysts raised the same point. Prices in San Francisco are still only at 2004 levels, cautioned Steve Blitz, chief economist for ITG Investment Research. “For those who bought and still hold homes in 2005, ’06 and ’07, they may still be in a negative equity position, depending on the terms of their mortgage,” Mr. Blitz wrote. “Don’t let those double-digit year-over-year percentage gains bias opinion to believe all is all right.”

 

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Boston Prices Outpace Nation

Greater Boston prices outpace nation

Posted by Scott Van Voorhis  September 23, 2013

The already overpriced Boston area is even more expensive now, with home values rising more than 10 percent in August to more than $341,000, Zillow reports this morning.

That’s nearly double the pace nationally, with home values across the country (Zillow’s index includes both prices and assessed values) having risen by a comparatively modest 6 percent.

In fact, this is a reversal of the trend we have been seeing over the past year as the real estate rebound kicked into high gear.

Greater Boston, which in most surveys includes everything inside the 495 beltway and some of the bedroom communities of Southern New Hampshire, saw a much less dramatic decline in home values than many other parts of the country after the bubble burst.

Hence, when home prices began to rise again, the Boston area posted respectable, but not spectacular, single-digit gains, compared to hard hit markets like Las Vegas and Phoenix, which saw prices suddenly soar by 20 percent or more.

Of course, when you’ve hit rock bottom and have been given up for dead, like Vegas and Phoenix and other overbuilt and over-speculated Sunbelt cities, there’s only one way to go, and that’s up.

Context is crucial.

So why is Greater Boston now outpacing the nation when it comes to rising home values?

A relatively robust economy driven by high-paying industries like biotech and tech are combining with decades of anemic residential construction in a perfect storm of surging demand and dwindling supply.

It may be good news for potential sellers, but for buyers, it’s only getting tougher out there as the fall market continues to heat up.

 

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More Sticker Shock In Boston

 

A recent post by Scott regarding prices and inventory levels in Boston and suburbs.

Coming this fall: More sticker shock

Posted by Scott Van Voorhis  September 9, 2013 08:34 AM

Welcome to fall, traditionally the hottest time for home sales, barring spring.

And brace yourself. After a small breather in August as the market slowed down a bit during vacation time, the fall is likely to bring another round of crazy price increases and bidding wars for scarce homes.

Here’s a Globe piece from an old friend of mine, Jay Fitzgerald, which offers a preview of the fall market.

More than 60 towns and urban neighborhoods have already blown past previous price peaks set in 2005 at the height of the housing bubble, the story notes, citing stats from The Warren Group.

And who’s leading the price charge? Well, if you haven’t already guessed it, it is the usual suspects, “desirable Boston neighborhoods and close-in cities and towns such as Arlington, Brookline, Cambridge, and Newton,” Fitzgerald writes.

Here’s a quote from a frustrated buyer interviewed in the piece.

“I always expected high prices,” said Rich Garfield, 31, a software engineer now renting in Somerville’s Davis Square, “but our agent told us right off the bat that everything we looked at would go higher than the asking price, and that’s exactly what has happened.”

If you have lived in Greater Boston for a decade or two, you might be wondering whether the crazy cycle of skyrocketing home prices is starting all over again.

If so, your right, and here’s why.

Here’s Fitzgerald’s piece again:

Mark Zandi, chief economist at Moody’s Analytics, a forecasting firm, said longer-term factors are also at work. Massachusetts has a decades-old history of dramatic run-ups in housing prices precisely because not enough new housing is built to meet demand, said Zandi, who has closely followed the New England economy.

A combination of scarce land and sometimes contentious permitting at local levels has inhibited home building in the state, he said. “It’s ultimately a supply problem.”

 

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July Was Best Month For Home Sales Since 2006

Great July market review from The Globe’s Chris Reidy below…

By Chris Reidy

|  GLOBE STAFF  AUGUST 29, 2013

The number of Massachusetts single-family homes sold in July was up more than 18 percent on a year-to-year comparison basis as the Bay State had its best month for sales volume since June 2006, the Warren Group said Thursday.

Condominium sales in the state were also up sharply. Meanwhile, the median price of a single-family home rose 10 percent in July, increasing to $349,000, said the Warren Group, a Boston company that tracks local real estate activity.

“Many recent real estate reports have signaled a strong real estate recovery, and our numbers speak to that rebound,” David Harris, editorial director of the Warren Group, said in a statement. “While consumer confidence and strong employment numbers continue to bolster the market, there’s concern that higher mortgage rates and increasing home prices could dampen the revitalized market.”

Last month, 5,941 single-family homes were sold statewide sold, up from 5,014 sold during July 2012, the Warren Group said.

As for condos, 2,336 were sold in the state during July, up nearly 17 percent from the same month a year ago.

July’s median selling price for a Massachusetts condo was $310,000, up 5.5 percent from July 2012.

The Massachusetts Association of Realtors also issued its monthly report on the local housing market Thursday. The association uses a different method than the Warren Group does to calculate sales activity.

According to the association, there were 5,750 detached single-family homes sold this July, a 20.3 percent increase from a year ago. The July 2013 total was the most homes sold in one month since July 2004.

In a statement, association president Kimberly Allard-Moccia said: “The combination of buyers wanting to close and move in before the start of the school year and their concern over increasing interest rates resulted in another positive month in July. Hopefully the activity of the past few months will encourage homeowners who are thinking about selling to put their homes on the market. Buyer demand is there, but the shortage of inventory often prices buyers out of the market.”

Chris Reidy can be reached at [email protected].

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Where Condos Are Going Over Asking Most

Below is an interesting post from David Bates at CurbedBoston. With all the “over asking” activity it’s a fascinating analysis.

Where and Why Hub Condos Go for Over or Under Asking

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Another month of Boston condominium closings and another couple of hundred above-ask offers accepted.

In nine key condo markets in July, 55.9 percent of sales prices were greater than list prices, which narrowly improves on June’s wicked impressive 55.4 percent share of over-ask offers.

As far as individual condos that sold for the most over-ask, 71-73 Stearns Road, #2, in Brookline sold for $121,00 over-ask; 85 Fayerweather Street in Cambridge sold for $131,000 over-ask; and 79 Chandler Street, #2, in the South End went for $226,000 over-ask.

As well, out of about 1,100 total closings in June and July in these nine key markets, about 90 offers went at least 10 percent over-ask, a segment I think of as “extreme over-asks.” On the other side of the real estate coin, only 62 June/July sales had even 5 percent negotiating room. Those sales with at least 5 percent negotiating room are a segment I think of as “under-asks.”

As I looked at the details of the extreme over-asks and under-asks, I wondered what separated them? Was there any characteristic that could determine whether an on-market condo would attract extreme or negotiated offers? I decided to look into it.

My first thought was to compare location, location, location. What I found out was that extreme over-asks were most prolific in Somerville, where almost one out of every five sales was extreme, and Cambridge, where nearly one out of every seven closings was extreme. In fact, I saw that just four markets (Cambridge, Somerville, Brookline and JP) made up more than 80 percent of all the extreme sales that had occurred in these two months.

Did that mean that under-ask offers permeated in the markets that weren’t dominated by extremes? In one case, this was very true. The No. 1 location for under-asks was Back Bay, a market that not only accounted for more than one-third of all under-asks, but also a market where extreme over-asks were rare.

In other neighborhoods, location didn’t seem to be much of an indicator of whether a condo was going to attract extreme or negotiated offers. For example, Brookline was among the most prolific for extreme over-asks (16), while at the same time it had the second most under-ask offers (10).

If it wasn’t location, then what was the best indicator of whether a condo was most likely to garner under-ask or extreme over-ask offers? The best indicator I found was market time. The shorter the time a condominium was on market, the more likely it was going to get extreme over-ask offers; and the longer the time was on market, the more likely that it was going to receive a negotiated offer.

While the vast majority of extremes sold in seven days or less (63 percent), nearly seven out of every eight (87 percent) under-asks were on market for at least 12 days. And, while only 5 percent of the extremes made it 30 days on market, 50 percent of the under-asks lasted at least 36 days on the market.

So, if negotiating room is the most important room in your condo purchase, don’t look at the neighborhood, look at days on market.

 

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Mortgage Rates Ease

 

Mortgage Rates Ease for Second Straight Week

  Jul 25, 2013
  By: , Realtor.com
Average rates on fixed mortgages trended downward for the second consecutive week.

The decline comes after rates spiked dramatically over the past month over worries the Federal Reserve would curb its bond-purchase program – giant stimulus policies involving $85 million worth of Treasury notes and mortgage-backed securities that have helped spur growth in a recovering housing market.

Three weeks removed from hitting a two-year high, the average rate on a 30-year fixed eased to 4.31 percent, down 0.08 percentage point from 4.37 a week ago, according to the latest survey by mortgage lender Freddie Mac. The 30-year fixed loan neared a historic low as recently as early May before spiking to 4.46 percent in the last week of June. It was at 3.49 percent at this time one year ago.

The average rate on a 15-year fixed mortgage saw its own decline, albeit a slight one. Previously trending at 3.41 percent, the average on a 15-year fixed loan fell by 0.02 percentage point to 3.39 percent this week. It previously achieved a historic low in early May, when it fell to 2.56 percent. A year ago, the average rate on a 15-year fixed was 2.8 percent.

In a statement, Freddie Mac chief economist Frank Nothaft said the relief “should help to alleviate market concerns of a slowdown in the housing market.”

“Thus far, existing home sales for June were the second highest since November 2009 and new home sales were the strongest since May 2008,” Nothaft continued. “In addition, the low inventories of homes for purchase are putting upward pressure on house prices.”

The positive signs from June sales bode well for the housing market moving forward, especially after it weathered its first significant spike in key mortgage rates.

The average rate on a 5-year hybrid adjustable loan fell slightly from 3.17 percent a week ago to 3.16 percent. After holding firm at 2.66 percent for four consecutive weeks, the average on a 1-year hybrid adjustable loan dropped by 0.01 percentage point this week to 2.56 percent.

Although mortgage loans remain historically low, home buyers and home owners looking to refinance may want to act quickly to lock in affordable rates. In the latest Mortgage Rate Trend Index by Bankrate.com, 91 percent of the mortgage analysts and experts polled believe average loans will trend upward or remain unchanged over the next week.

“Rates have moved significantly higher in the last five weeks,” says Academy Mortgage branch manager Derek Egeberg. “There is greater risk of continued moves higher than potential of a market move lower. Advice is to lock if you are a buyer with a property under contract.”