2013 Real Estate Recap: Home Sales and Prices Increase in Massachusetts
Year over year home sales in Massachusetts showed strong gains in 2013 for both the number of home sales and the average selling prices compared to 2012.
The number of home sales increased 6% compared to 2012, which is impressive considering there were fewer homes available for sale than in 2012. There were 77,181 home sales in Massachusetts in 2013 compared to 72,820 sales in 2012 and 60,429 in 2011.
Home prices in Massachusetts also showed an increase. The average selling price for a home in Massachusetts rose to $344,963, an increase of 7.4% compared to 2012.
Southern New Hampshire (Cheshire, Rockingham, and Hillsborough Counties) also showed growth in home sales. There were 10,503 homes sold in 2013 compared to 9,581 in 2012, an increase of 10%. Surprisingly, average home prices in Southern New Hampshire dropped 2% to $228,106.
Home Sales Could Have Been Even Higher
Overall home sales would have been even higher for the year if it hadn’t been for two factors: the jump in interest rates in May and the Government Shutdown in October.
Home sales in Massachusetts got off to an aggressive start in 2013. Year over year home sales in January spiked 12% compared to January 2012 and sales remained steady until interest rates began to climb in May. June home sales slowed as more home buyers hesitated with the new higher interest rates, but they picked back up in July and continued through October. Our Mid-Year Housing Report in July showed home sales for the first half of the year were higher than the same period in 2012, and year over year home prices also continued to climb.
These strong sales would have continued if the Government Shutdown on October 1st didn’t occur. Failure to pass a budget in Congress caused the shutdown, which resulted in thousands of federal workers being put on furlough. This had a huge impact on November home sales nationwide. Massachusetts home sales in November dipped 10% compared to November 2012, which was a direct result of the shutdown.
Interest rates in 2013 reached record lows which gave buyers more purchasing power. Although rates began to increase in May, they have since hovered around the low- to mid-4% range—keeping home purchases affordable. Another reason more buyers should get into the market as soon as possible is that mortgage rates are expected to rise to 5.5% by the end of 2014, according to Lawrence Yun of the National Association of Realtors, and buyers want to take advantage of the low rates before they go back up.
At the same time, home inventory levels are at their lowest levels in 10 years. As of today, there are just 17,999 homes on the market in Massachusetts, a decrease of nearly 5% compared to last year at this time, and 31% lower than it was in 2012. Although building permits are on the rise, it’s not enough to keep pace with demand.
This combination of more purchasing power and more competition for homes drove prices up. For some towns, home selling prices even went above their peak prices before the housing crisis.
2013 Saw a Jump in Condo Sales
Another trend we saw in 2013 was the jump in condo sales compared to 2012. While single-family home sales increased 6% year over year, condo sales increased 7%. As you can see from this chart showing yearly average sale prices by type of home, condo prices have been steadily increasing and for the first time in 10 years, are much closer to single family home prices than they have ever been.
There are several reasons for this. There are more empty-nesters looking to downsize their homes, more young professionals moving to the metro Boston area because of the strong job market, and in many areas it’s cheaper to own than it is to rent.
For instance, the average price for a home in Massachusetts is $344,963, so at the current interest rate of 4.48% for a 30 year fixed mortgage, the monthly payment would be $1,744. The average monthly rent for a 2 bedroom apartment in metro Boston area, on the other hand, would be much higher at $2,398. And though housing prices are showing slight increases, rental prices are increasing at a much higher rate. The Boston area rental market has seen a 5.5% year over year increase of rental prices* and this trend will likely continue.
Home Sales and Prices by County
The Massachusetts County with the largest increase in home sales was Bristol County, with an 18% jump in the number of homes sold in 2013 compared to 2012. 4,536 homes sold in 2013 compared to 3,854 in 2012. Essex County came in second, with 10% more homes sold in 2013 compared to 2012. Middlesex County came third, with 9% more homes sold for the year.
For average price, Suffolk County came in first. The Boston area and surrounding towns saw large increases in average home prices for the year. The average price for a home in Suffolk County increased 14% compared to 2012: $499,940 compared to $438,702 the previous year. Franklin County came in second for year over year price increase, showing a 13% increase in the average selling price of $200,692 compared to $177,581 in 2012. Bristol County also had a 13% increase in price, from $222,391 to $250,455 in 2013. In Barnstable County prices remained flat and it was the only county not to show an increase in average home sale prices year over year.
What We’ll See in The 2014 Housing Market
We expect home sale prices to continue to rise due to the low inventory levels and high demand. New home construction is at a 50 year low, which has driven home prices up and limited choices for buyers.
We do not expect overall home sales to increase very much in 2014 over 2013 because of the low inventory.
With fewer affordable homes being built there are more renters than before. This is driving up rental prices making multi-family homes more attractive to investors, who are becoming a larger share of property owners.
As home prices rise, more home sellers will enter the market. Yun says conditions to buy a home are still the fifth best in the past 40 years. As we reported, now is the best time to buy a home before rates increase and before more buyers enter the market in the spring.
Housing Reports provided by The Warren Group. Copyright ©2014.
Boston Rent Increases: http://www.wbur.org/2013/06/07/boston-rent-increase