Downtown Boston Market Update 12/14/12

YTD 2012                YTD 2011            

Transactions: +30.61 %   3307                            2532

Absorption: +32.62%       $2,228,403,567    $1,680,336,519

Average: +1.54%                 $673,844                 $663,640

Median: +5.96%                   $498,000                $470,000

High End Data Points;

• YTD Sales $1,000+/Sq.Ft. 146
• $1MM+: 462,
• $2MM+: 103,
• $3MM+: 45,
• $1MM+ as % of total sales: 13.97%

Headlines:

Mass. home sales up 22% in first 10 months – Boston Globe 11/28/2012 –  Sales between January and October rose to 39,491, a 22 percent increase compared with those months in 2011.

Real estate recovery sounds familiar – Boston Globe 12/4/2012 –  the news about home sales — both locally and across the country — has turned out to be one of the most upbeat economic developments of the year.

Demand, prices rise for bay state homes – Boston Herald 12/7/2012 – An improving job market and low interest rates are two of the biggest drivers for the uptick in sales volume, but prices are just starting to show a consecutive upward trend this year.

Jobs Picture Should Brighten in 2013 – Wall Street Journal 12/2/2012 – Housing is finally recovering. Home values are up 7% nationally through the first nine months of 2012, according to the S&P/Case-Shiller index.

Deduction cap would hit the comfortable – Boston Globe 12/5/2012 – Say you live in Massachusetts (or New York, or California, or Illinois). You and your spouse earn salaries commensurate with your advanced degrees, together bringing home $250,000 to $500,000. You make monthly mortgage payments on a nice house in a suburb where property taxes are steep.  Whether you call yourself rich, fairly well-off, or merely upper-middle-class, you are in the crosshairs of the Washington tax debate.

Home prices up most since 2006 – Boston Globe 12/5/2012 – Mortgage rates are near record lows, while rents in many cities are rising. That makes home buying more affordable, pushing up demand.

Soaring Rents Drive a Boom In Apartments – New York Times 12/7/2012 – As residential building recovers from a near standstill after the housing crisis, much of the momentum is coming not from subdivisions with green lawns and two-car garages but from rental apartments.

 

View:

Statewide the housing market is enjoying a rebound following the Financial Crisis and Great Recession.  Massachusetts single family home sales are up for the first ten months of the year according to stories in the Boston Globe.  The Warren Group, a Boston real estate tracking company, reports sales transaction up by 22% year over year in November.  Columnist Steven Syre recently wrote that while sales volume has increased and supply has dwindled across the state “Median prices have remained completely flat or increased moderately” over the past year.

Accepted economic theory holds that; when supply is low and demand is high, prices increase.  So far in the State as a whole that has not happened.  Timothy Warren of the Warren Group offers this explanation based upon the last recovery from a real estate downturn (1989-1990):  “We had exactly the same thing back in the ’90s, we had two years of increasing sales volume before median prices started to edge up.”  Momentum in the market will drive prices higher in time, said another way: with the limited supply and the high demand prices have nowhere to go but up, which is exactly what is happening in Downtown Boston.  The numbers at the top of this report show the upward pressure on pricing with the median price 6% higher YTD.  Here is the data:

 

While the State of Massachusetts as a whole is just beginning to see recovery in transaction volume, Downtown Boston is ahead of the curve.  Transaction volume has increase exponentially over the past three years and, as a result, the median price exceeds its highest YTD level in history (2008 & 2011).  We expect these trends to continue in the near future as supply remains historically low with limited new construction to meet rising demand.

This week in Boston Real Estate 11/16/2012

Category – % Change – YTD 2012 – YTD 2011            

Transactions: +31.84 % – 3089 – 2343

Absorption: +32.87% – $2,052,482,415 – $1,544,736,304

Average: +0.78%  – $664,449 – $659,298

Median: +5.91% –  $492,500 – $465,000

High End Data Points;

• YTD Sales $1,000+/Sq.Ft. 126, $1MM+: 418, $2MM+: 90, $3MM+: 38, $1MM+ as % of total sales: 13.5%

Headlines:

Boston Herald 11/07/12 – Navy Yard Development Sails Ahead – “The developer hopes to break ground by June on a four-story brick building with 54 rental units, a mix of studios and one-bedrooms with 20 percent designated as affordable. Market-rate rents will range from $1,800 to $3,000.”

Boston Herald 11/08/12 – Million Dollar Sales – “The number of homes selling for $1 million and over in Massachusetts was 1,915 during the past year, almost unchanged from the 1,913 homes that sold for $1 million and over the year before.”

Wall Street Journal – 11/07/12 – New Households Sprouting Up – “Americans are setting up house at the fastest rate in more than six years, an indication that recession anxiety, which prompted adult children to move in with their parents and single people to postpone marriage, is starting to ease.  The nation added 1.15 million households in the 12 months that ended in September, according to the most recent Census Bureau data.”

Wall Street Journal – 11/8/12 – Home Prices Across U.S. Climb 7.6% From Year Ago – “Home prices appreciated in a growing number of cities during the third quarter, the latest evidence that the real estate recovery is gaining momentum and breadth.  The median price for an existing single-family home was $186,000 in the third quarter”

View:

The headlines on housing continue to reflect improvement in the national and regional market with price on the rise.  Downtown Boston has been out ahead of the trend holding values over the past five years and trending well over last year’s solid performance.  Our internal projections for year end of 3584 total transactions and $2,386,847,698 in total sales volume compare favorably with the pre-financial crisis years of 2004-2008.

The suburban Boston markets, specifically Metro-West continue to sell off inventory, show price stability and are experiencing lift in total sales volume.  As the Boston Herald notes above, sales over $1 Million have held steady across the state. What we know from our data is that, in Downtown Boston, sales over $1 Million are well ahead of last year; 418 YTD 2012 vs. 318 YTD 2011, a 31.5% increase.  Demand for housing in Downtown Boston continues to be strong and available inventory holds steady insuring upward pressure on pricing.