Mid Year Housing Report: Home Sales and Prices Jump for First Half of 2013
The Lamacchia Realty Mid-Year Housing Report shows an increase in home sales in Massachusetts for the first six months of this year compared to the same time period in 2012.
According to data provided by The Warren Group, there were 33,861 home sales for all of Massachusetts from January 1st to June 30th this year compared to 33,057 in 2012, which results in an increase of 2%. For New Hampshire counties Cheshire, Hillsborough, and Rockingham, there were 4,574 home sales for the first six months of this year compared to 4,296 during the same period last year, an increase of 6%. The average price for these New Hampshire counties hit $242,888 in June, the highest monthly average price this year, which is a 1% increase over June of 2012.
The big news is that prices for homes in Massachusetts have been steadily increasing for the past six months. The average selling price hit $366,246 in June, an increase of 11% compared to June of 2012, and the highest monthly average selling price this year.
For some towns, prices are even above peak prices before the housing crisis hit. For instance, in Belmont the average price for a home for the first six months in 2005 was $611,344, and this year the average price jumped to $731,106, a difference of $119,762 or 20%. In Brookline, the average price for a home for the first half of 2005 was $723,266, and this year that number is $901,532, a difference $178,266, or 25%.
Why Are Prices Going Up?
The increase in prices is due to the low inventory of homes available for sale, which has increased competition for homes. In January of this year, housing inventory levels bottomed out at 22,000 homes for sale in Massachusetts, the lowest amount of inventory since 2004. There are currently 26,618 homes on the market which is 22% lower than they were this time last year, when there was 34,142, and 35% lower than they were in July 2011 when there were 40,955 homes on the market. With more home buyers looking and fewer homes available, we saw more bidding wars than ever, which contribute to the increase in selling prices as well.
Another reason average home prices are showing an increase is that there were 28% fewer homes under $100,000 sold in 2013 compared to the same period 2012. In 2012 there were about 2,500 homes sold under $100,000 and this year there were about 1,800. Many of these homes under $100,000 were foreclosure sales, which are also down compared to last year. In the first six months of 2012, there were about 3,500 foreclosed homes sold and this year there were only 2,100, which is a decrease of 40%.
Low interest rates have been a factor in the home price increases. From January to May, rates were in the mid to low 3% range which helped fuel the surge in sales.
Housing Forecast for the Rest of 2013
One factor we’re watching is the fluctuation in interest rates. Mortgage interest rates jumped to their highest level in years in June. This has slowed down the market because it decreases affordability.
For instance in early May, when the average conventional rate was at 3.81%, a monthly payment on a $350,000 loan would be $1,633. With today’s rate of 4.45%, the monthly loan would jump to $1,763, a difference of $130 a month.
The average rate for a 30-year fixed mortgage loan rose to almost 5% at the beginning of July in response to a press conference where Federal Reserve chairman Ben Bernanke said that if the economy continues to improve the Fed could slow quantitative easing later this year.
But this month at a NBER conference held in Boston, Bernanke said a “highly accommodative monetary policy for the foreseeable future is what is needed in the U.S. economy,” and that they would not automatically raise interest rates when the economy improves, but that they would consider gradual change. So if rates stay in around the 4% range, the market will likely be ok, but if the rates go up more, then the market will slow down more. Over the last week rates are hovering around 4.5%.
Home sales will most likely be down this August compared to last August. We ran a report for homes under agreement for July 1st to July 15th and compared them to under agreement statistics for the same period last July. During that period last year there were 3,234 homes that went under agreement, and for the same period there are 2,808 homes that went under agreement, a drop of 13%. This will definitely create fewer home sales for August.
Some counties did better than others. For instance, the number of home sales in Worcester County for the first six months of this year increased 0.2%, but in Middlesex County home sales are up 6%. Bristol County home sales saw the biggest increase in the state for the first six months compared to the same period last year. There were 2,066 home sales in Bristol County compared to 1,311 home sales in 2012, an increase of 58%.
Housing starts are up for June compared to last June, which means more new homes are coming on the market, and with prices increasing, more sellers will list their homes for sale so they can buy a bigger home, also known as trading up. This means more homes will be on the market this year, which will help improve inventory levels and support a healthy housing market. Overall we feel confident about this housing recovery.
Sources: Under Agreement Report July 2012 and 2013: