Stuck in the Spring Mud (May 2011 Insider Report)

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Greetings Boston Redfinnians!

The Boston housing market is still spinning its wheels, stuck in a quagmire of flat demand and a huge inventory of homes that nobody seems to want. If things don’t change soon, we could be wading through the muck all summer.

But the bad economic news keeps flowing downhill. The stock market is just a wee bit on the unsteady side, employment numbers are weak, gas prices are high, and home prices around the country are already in the clutches of the dreaded double-dip.

Let’s take a closer look at our inventory, sales, and prices for May.

Water, Water Everywhere…

As you can see in the chart below, inventory is up. We’re practically swimming in it. It seems like there should be plenty of homes to go around, especially since buyers aren’t exactly flooding the market.

City Compared to April 2011 Compared to May 2010
Single Family Houses
Boston +19.0% +29.5%
Condos
Boston +12.3% +17.0%
Cambridge +13.9% +23.8%
Somerville +19.5% +34.9%
Brookline +11.9% +28.2%

Change in # of Houses for Sale on May 31st 2011

But it’s the same old story we’ve been crowing about for months: there are lots of homes on the market, but few good ones. In a sea of unwanted inventory, buyers are fighting bidding wars over the islands of quality: good homes that are priced well.

For instance, look at the numbers for Cambridge and Somerville condos in the inventory chart above. Inventory is much higher than it was a year ago. But those units aren’t moving.

“Our clients have a lot more to choose from right now,” observes Redfin Cambridge agent Shawn Flynn. “We’re showing more properties more frequently, and buyers are starting to get comfortable with the market. There are a lot of great places for sale, but prices will need to come down before buyers will bite.”

Sales: Slightly Better than Horrible

The sales numbers back up Shawn’s observations; despite the growth of inventory, sales are down sharply from this time last year. Granted, May’s numbers are generally better than April, but that’s a bit like saying you can outrun Rodin’s The Thinker; April’s numbers were just bad.

City Compared
to Apr. ’11
Compared
to Apr. ’11
Adjusted for
# Weekdays
Compared
to May ’10
Compared
to May ’10
Adjusted for
# Weekdays
Single Family Houses
Boston +8.0% +3.0% -37.1% -39.9%
Condos
Boston +8.0% +3.1% -32.3% -35.4%
Cambridge +20.4% +14.9% -29.3% -32.6%
Somerville -6.5% -10.7% -40.8% -43.5%
Brookline +20.4% +14.9% -14.5% -18.4%

Change in # of Houses That Sold in May 2011

Then again, even comparing to last year’s sales numbers is a tricky business, because last year’s demand was artificially inflated by the government tax credit for home buyers.

In fact, it’s hard to say we’ve had a “typical” housing market in years; it’s been a parade of bubbles, crashes and stimulus packages for some time now. Potential buyers seem happy to ride out the uncertainty by renting, but that might not last; rents are going up and mortgage interest rates are very low, making buying a (potentially) more attractive option. But without a broader sense of economic stability, will buyers take the plunge?

As usual, it all comes down to prices.

Prices Between a Rock and a Hard Place

So, buyers aren’t willing to budge unless they find a good deal on a good house. Will sellers respond by dropping prices?

Maybe the question should be, can sellers respond by dropping prices? Sellers who bought their homes during the bubble years probably can’t afford to sell for today’s more depressed prices. So far, sellers are generally holding their ground on prices, or just sitting on the sidelines and hoping for better days.

City Median Price in
May 2011
Median $/SqFt Change
since April 2011
Median $/SqFt Change
since May 2010
Single Family Houses
Boston $400,000 +18.1% -0.8%
Condos
Boston $380,500 -6.5% +15.3%
Cambridge $368,000 -3.1% +1.9%
Somerville $360,000 +10.6% -0.3%
Brookline $439,000 +5.8% +5.8%

Change in Median Price of Houses That Sold in May 2011

At some point the cheap cost of money and rising rents will probably push at least a few more buyers off the fence, but summer is traditionally the strongest season for home sales. If sales don’t recover before fall, we might just go right back into hibernation.

Want to know what’s happening in your neighborhood? Download our comprehensive spreadsheet and dig into the data for yourself! Inside you’ll find county, city, and neighborhood information galore. To learn more about how we calculate these numbers, check out our methodology page. You can also liven up the place by posting a comment below.

Best,

Alex Coon
Boston Market Manager