The seasonally adjusted Case-Shiller Home Price Index for Boston may be signaling that a new round of real estate weakness is in the offing in the Bay State. The seasonally adjusted Boston Index dropped 3.8% in April (the most recent month reported on by the Index).
Weakness after sizzling spring in Boston?
The April decline in home values in Greater Boston seems incongruous. After all, the Boston real estate market was enjoying such a strong spring. In Boston and trendy communities in the Greater Boston region, the spring of 2015 was characterized by sharply rising prices and fierce bidding wars fueled by an exceedingly tight supply of homes for sale. Boston.com and The Boston Globe recently published articles describing the woeful difficulties of buyers trying to secure housing in the sizzling Metro Boston markets.
A summer slowdown happened last year
You may remember how the summer of 2014 saw a “mini-bust” in the Massachusetts real estate market. The weakness seemed to come out of nowhere after a very strong 2014 spring selling season.
During the fall of 2014 the media carried lots of reports on how home sellers and listing agents alike were surprised and chagrined over the fact that home prices had stopped rising and listing were suddenly not selling. At the time, many people in Massachusetts were very upset!
But then conditions improved. The Index recovered all its loses by the end of 2014 and moved higher as 2015 got underway. The “mini-bust” of 2014 was largely forgotten.
Case-Shiller Index signaling another summer swoon in 2015?
The important thing to note about the 2014 decline in the Case-Shiller Boston Index is that it exactly coincided with the start of the 2014 “mini-bust”. In effect, the seasonally adjusted Case-Shiller Index called the advent of the 2014 summer swoon.
Moving forward to this year, the Index again is showing an unexpected drop after a run of strong increases. The Index may be serving as a reliable canary in the coal mine early warning system of upcoming market weakness.
The chart above compares how the Boston Index performed in 2014 with how it is doing so far this year. Just like 2014, the Index rose in the early months of the year, and has now moved lower.
Further from Boston, weaker markets in 2015
If you are looking for more signs of weakness in Massachusetts real estate this year, look at the many communities of eastern Massachusetts located beyond a reasonable commute time to Boston. Out on the I-495 loop for example, while desirable homes that were priced attractively have sold very quickly so far in 2015, a significant number of other listings in the region have sat unsold for extended periods of time. Many of the homes that lingered on the market had to drop their asking prices to eventually find a buyer.
Indeed, the overall Massachusetts real estate market performed rather indifferently in the first half of 2015.
Median sales price rises marginally
The median sale price of homes was up only 1.8% compared to the first half of 2014.
While this was the third year in a row of gains in the first half median sales price in Massachusetts, the increase was very modest compared to how homes prices were spiking in Boston and nearby “hot” cities and towns.
Sales volume up modestly
It was a similar picture for single family home sales volume in Massachusetts for the first six months of the year. Home sales volume rose a modest 1.2% over the first half totals of the previous year.
Home sales volume had dipped slightly in the first six months of 2014 compared to 2013, so it was good to see volume rebound this year. But certainly for the state overall, there was no home sales bonanza in the first half of 2015!
Home sellers take note of the potential for a slow summer
Given the Case-Shiller Boston Index’s recently announced 3.8% drop and the indifferent first half performance by the overall Massachusetts market, home sellers need to recognize the potential for a summer downturn this year. After all, it happened last summer!
If your home is not selling
If your home in Massachusetts is currently on the market and not getting offers, keep in mind that pricing real estate is an art, not a science. Work with your agent on a price adjustment sooner rather than later. If your home is overpriced, even by a little, the earlier you reduce your asking price, the sooner your home will find a buyer. You might be pleasantly surprised at what even a minor price change can do for you!
If you are considering selling
Setting an asking price is one of the thorniest areas of real estate. You as the home owner understandably want the most possible for your property. However, if your agent’s value estimate comes in below your expectations, avoid the temptation to demand a higher than indicated asking price. Trust the considered opinion of your real estate professional and price your home in line with your agent’s suggestion.
After many years of experience in the trenches of residential real estate in MA, I can honestly say that if you are right and the agent’s suggested price is inadvertently below true market, the market will correct that by bidding the selling price up. On the other hand, if you pressure your agent to set the asking price too high, the market will severely penalize the listing and your house simply will not sell until the asking price gets in line with market value. Homes that are overpriced when they enter the market often sell for LESS than they could have gotten had they been priced properly in the first place!
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