Making Sense of Recent Real Estate Headlines
I’ve said it before, and I’ll say it again: All real estate is local. I’m part of the local brokerage Hammond Residential Real Estate, which spends a lot of time culling through and interpreting data in Boston (the “micro-environment”) as well as the spokes emanating from the city. With this in mind, I will explore some of the recent head-spinning data and commentary in the news.
A Globe article on January 25 stated:
It’s official: 2011 was a bad year for the local housing market.
Sales of single-family homes in Massachusetts dropped by almost 6 percent last year, to 38,994, compared with 2010. That was the fewest number of deals since 1990, according to Warren Group, a private company that tracks local real estate.
Median home prices also declined by 3 percent, to $286,000, marking the third year in a row in which median prices were below $300,000.
In reaction, Saul Cohen, president of Hammond, pointed out in an email to his agents:
There is no question that the statements (are) accurate. But, the data pooled all Massachusetts sales: Boston and Worcester, Brookline and Belchertown. Real estate is much more local.
Cohen examined data from the towns in which our company has offices: Boston (four offices), Belmont, Brookline/Newton, Cambridge, Charlestown, Concord, Framingham, Hingham, Lexington, Sharon, Waban (Newton), Wellesley, Weston, and Winchester. As a result, the findings are clearly skewed toward higher-end locales.
In these towns, the data (courtesy of Saul Cohen) from 2006-2011 looks like this:
[ Year ]
[ Units ]
[ Volume ]
[ Avg. Sale Price ]
There has been modest recovery units and volume in these last two years from the low point set in 2009, but we are not back to the heights set in 2007.
“Volume” is recovering and so is “units.” But, of interest, there has been a major shift in the average selling price. Since the low which was hit in 2009 of $679,062 average selling price, in two years it has soared to $761,006 average selling price. More inventory sold in 2011 than did in 2009 and included more of the expensive units.
As usual, the aforementioned Globe article compares data from the Warren Group and Massachusetts Association of Realtors. The latter uses “arm’s-length” transactions recorded by Multiple Listing Service. MAR’s conclusion was that sales in 2011 was “essentially flat” over the previous year.
The Case-Schiller index found home values down about 1.6 percent in the Boston area when comparing November 2011 to October 2011. The article concludes with a quote from retired Wellesley College professor of economics, Karl Case, who co-designed the index:
“You are starting to see a turnaround,” Case said. “Things are looking better.”
The state’s housing market has generally fared better than the rest of the country throughout the extended downturn, suffering price declines of about 18 percent since the housing peak of 2005. That’s about half the drop in property values nationwide during the same period.
The Boston Business Journal takes a look at Boston’s condo market and concludes that, “The Hub’s downtown condominium market held its own last year as sales and median prices were up by less than 1 percent.” The article goes on to note:
The best news for developers came among the six dozen luxury buildings where the median prices were up by 8 percent last year to $719,500, up from $665,000 in 2010 and sales increased by nearly 3 percent.
The Globe weighed in on this news as well, quoting Taylor Blair, president of the Link network and tracking company:
Taylor Blair said some downtown condos sold significantly above their previous price.
“What shocked me were some of the resales on some of the relatively new projects,’’ she said. “Buyers are going to be challenged in trying to find appropriate properties.”
Most of the above towns are fundamentally sound, with good/great schools, a solid tax base, and within an easy commute of Boston, Cambridge, and 128 (“America’s Technology Highway”). It is true that real estate markets are so hyperlocal that they can result in a tale of two (or three, or four …) cities. But not all of the above towns represent a walled-off fortress. With mortgage rates at or below 4 percent, and three-bedroom homes in decent locations in the $600,000s or even $500,000s, young professionals are finding such towns within their grasp. The more eminent problem for them right now is a lack of inventory. It’s why we are seeing bidding wars in Newton, Lexington, and Concord.