Market Snapshot for Q1 2018
Where is the market going is the question everyone is asking and not without justification, however, the trends are not clear.
What was the trend with single family homes?
Comparing the first quarter of 2018 with the first quarter of 2017, the median sales price of Single Family homes shows a large decrease in four of the strongest local markets. Cambridge, Brookline and Lexington have seen a drop of more than 20%, showing prices on level with 2014-2015 prices, with Newton showing a 6% decrease. In contrast, the median sales price in towns on the outskirts of these markets has increased by about 8%-10%, with Needham going up 25%, exceeding both Lexington and Newton’s median price.
The total number of single family sales has dropped in most towns by close to 30%. However, Newton has seen an increase of 7%.
What is the trend with condos?
Because condominium sales are more common in urban areas, we decided to look at the trends in Boston, Cambridge, Arlington, Somerville and Natick as well as Newton and Brookline. The median sales price for condominiums has increased by 5-10% in most areas, with Cambridge increasing by 35%! In our comparison, Arlington is the only town to see a decrease, with a median sales price decrease of 8%.
Most towns have seen a large decrease in the volume of sold condos with the exception of Boston, which has shown an increase of 46% from the first quarter of 2017. In addition, the median sales price of condos in Boston has also increased by 9%.
What we are seeing is that most millennials are buying condos, many of them smaller, inner city units in Boston, Cambridge and Somerville over larger units in the suburbs. This might explain the continued increase in the median sales price of condominiums. The first quarter of 2018 is the first time in the history of Real Estate trends that the median sales price of condominiums is higher than the median price of single family homes in Massachusetts.
So where are we heading?
This is the question everyone asks me and I wish I had the answer J.
Here are a few factors to take into consideration:
- Interest rates have increased and probably will continue to do so. If that is the case, the buyer’s costs associated with a mortgage will increase, and thus buyers will be able to pay less for their house.
- Investors still play a big role in the condominium market, often outbidding end-users. However, with the increasing condo prices, the Return on Investment (ROI) is decreasing resulting in less investment possibilities.
- The decrease in median, sold prices in the stronger towns might be an indication of what is coming. As buyers get priced out of the stronger markets, they look for alternative towns with lower pricing.
- Overall, less homes, both single family and condos, were sold in the first quarter of 2018 compared to the first quarter of 2017.
In my opinion, I believe that we will see a decrease in prices. It might take some time but I think the signs are all pointing in that direction. However, only time will tell, as every day is a new day, and it is not for us to tell the future…