Hot Weather, Cool Market (June 2011 Insider)

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Greetings Boston Redfinnians!

As the heavy heat and humidity descends and we enter the thick of the summer, sales numbers continue to slump from last year’s home buyer tax credit-fueled highs.

May was missing the typical spring pop and June was looking downright scary for a while, but the real test is always July. With the 45-60 day sales cycle for most real estate transactions, the spring market’s health really becomes clear in the June and July closings. The spring market did indeed get moving, but just not as much it has in the past year. The number of July closings indicates that there was a nice jump in sales from last month, but not enough to offset the continuing rise in inventory.

The real question isn’t will prices come down on this abundance of properties, but can they? Lots of sellers seem to still be pricing their properties high, but many sellers probably have to price high in order to recoup money or merely soften their losses.

Inventory Goes Up

Inventory continues to grow in many areas and is certainly up across the board from last year. Cambridge seems to be leveling off a bit, but Somerville and Brookline are both increasing month-to-month at a surprising pace, considering demand.

Harry Silverstein, a Redfin agent who lives and works in Brookline, has noticed that “the market is still relatively brisk for well-priced properties, but there’s a bit of a penalty for sellers who don’t price accurately. It certainly feels like there are more homes to choose from since the spring; homes are coming onto the market and sticking around longer than they were just a month or so ago.”

City Compared to May 2011

Compared to June 2010
Single Family Houses
Boston +13.5% +18.1%
Condos
Boston +5.8% +12.6%
Cambridge +9.4% +8.3%
Somerville +11.7% +23.6%
Brookline +12.5% +24.5%

Change in # of Houses for Sale on June 30th 2011

We expect that demand will increase after the 4th of July break; if buyers are willing to brave the hot & hazy weather, we might see a nice jump in sales over the next month. We’ll have to keep an eye on sales figures through July and August to get a true picture of the spring/summer market.

Sales Go Down

The flipside of the increase in inventory continues to be the decreased numbers of sales compared to last year. This certainly has something to do with the lack of the home buyer tax credit, but also points to the overall lack of immediacy for many would-be buyers.

City Compared
to May ’11
Compared
to May ’11
Adjusted for
# Weekdays
Compared
to June ’10
Compared
to June ’10
Adjusted for
# Weekdays
Single Family Houses
Boston +70.1% +70.1% -24.3% -24.3%
Condos
Boston +25.6% +25.6% -30.9% -30.9%
Cambridge +65.2% +65.2% -25.5% -25.5%
Somerville +112.9% +112.9% -34.7% -34.7%
Brookline +36.8% +36.8% -23.8% -23.8%

Change in # of Houses That Sold in June 2011

Given the current climate of economic instability, buyers seem to be waiting on the sidelines. We’re certainly feeling the lack of demand in our day-to-day business.

Prices Go Nowhere

Prices seem to have remained fairly stable, with no major fluctuations in median value for most areas, but the more interesting story is in the details. The drop in median price-per-square-foot hints that higher-priced properties sold well earlier in the season, but high-end sales may be slowing down a bit in the summer.

City Median Price in
June 2011
Median $/SqFt Change
since May 2011
Median $/SqFt Change
since June 2010
Single Family Houses
Boston $412,000 +6.7% -2.9%
Condos
Boston $389,500 -3.0% +4.2%
Cambridge $431,125 -4.5% +0.2%
Somerville $385,000 -0.5% +7.1%
Brookline $479,000 -4.6% -1.9%

Change in Median Price of Houses That Sold in June 2011

Will prices come down enough to spark the currently lackluster demand? If the economy can gain some traction and all of the natural disasters, political upheavals and dips in consumer confidence can fade out, low interest rates may keep buyers interested in finding their dream homes.

The Fed has stopped buying new mortgage-backed securities and is only replenishing its current levels, so it’s anybody’s guess as to what will happen to rates in the long term. Our guess is that we should start to see a rise in rates in the next six months.

Says Redfin partner lender Sofia Travayiakis: “Given the low inflation rates and slow growth, we’ve seen reports this week that rates will be up into the low 5%s, but not much higher than that in the short term, or likely even through winter.”

If you can afford a home and have the energy, there seems to be good inventory to choose from in most areas, and money is still cheap. Hot homes move quickly but the soft demand should make finding what you want a bit easier. Good luck, and we’ll see you out on tour!

That’s it for this month’s report. 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

  • Plh1123

    I don't see prices going down much further.  At some point it becomes more profitable to rent your place out rather than sell.  Rental prices are going to start going up and people will realize buying is still a better option if you are going to stay put for a few years.