There are some industry pundits claiming that Boston area residential home values have risen too quickly and that current levels are on the verge of another housing bubble. It is easy to see how this thinking has taken form if we look at a graph of median Boston, Cambridge and Newton, MA single-family home prices from 1999 to today.
The graph definitely looks like a rollercoaster ride. And, as prices begin to reach 2005 levels again, it “seems logical” that the next part of the ride would be downhill. However, this graph includes the anomaly of the price bubble and the correction (the housing slowdown).
What If The Bubble + Slowdown Didn’t Occur?
Let’s assume that instead of the rise and fall in home prices that we saw last decade, we just had normal historic appreciation from 1999 to today. According to the 100+ experts that are surveyed for the Home Price Expectation Survey, normal annual appreciation for residential single family homes from 1987 to 1999 was 3.6%. Starting with the median home price in 1999, we added 3.6% to it each year since then. Here is that graph intermixed with the above graph.
What this shows us is that, had the bubble and slowdown not occurred and instead we just had normal annual appreciation over this period, prices would actually be greater than they are today.
The Bottom Line
There is no reason for alarm as prices seem to be right in line with where they should be. Many thanks to our friends at KCM Blog for pointing the national trend which I’ve tailored to the Boston real estate market in this post.
Here’s July 2016’s Monthly Indicators report from the Greater Boston Association of Realtors® showing Boston real estate market trends.
July 2016 Greater Boston Real Estate Market Trends
Even as prices rise in many communities, homes are selling faster now than they have in the past several years. This creates a situation where buyers need to move fast in order to secure homes, and they may have to pay more for them. While increasing prices generally coax more selling activity, there has been some hesitancy among potential sellers who worry that they will not be able to buy a desirable and reasonably priced home once they sell.
- July single-family home sales – DOWN -16.1% over last year
- July Single-family median prices were UP + 4.5% to $575,000
- July condo sales – DOWN -17.4% and median prices UP +7.6% ($495,000)
- Inventory in July DOWN – 23.1% to 2,850 and Condominiums DOWN – 23.0% to 1,457
- SF listings added to the market in July DOWN – 18.8% over last year. (1,323 from 1,630 in 2015)
- Condo listings added to the market DOWN – 1.1% over last year. (1,105 from 1,117 in 2015)
Interested In Specific Neighborhood / Area Real Estate Market Trend Data?
Here’s the latest update of Real Estate Rewind Q2 2016, an online quarterly report produced by the Greater Boston Real Estate Board (GBAR) which summarizes residential real estate market activity in the GBAR jurisdictional area.
The newly released reports contain detailed data by Region I community for the condominium (page 1) and single-family home markets (page 2), including units sold, median price, average days on market, pending sales, and inventory levels for the second quarter of 2016 with comparison data for the same period last year. Check it out.