The latest reading of the benchmark Boston Index stands at 217.28, 20% above its 2005 prior market cycle high of 180.81. That’s 45.7% above the Index’s 2009 low of 149.05 set during the Great Recession.   The rise in home prices in Massachusetts has been accompanied by an inadequate supply of homes for sale, which has gotten progressively worse every year since 2015.

Boston Globe cites huge home price run up in formerly depressed areas

It’s no secret that the Massachusetts housing market has been on a broad upswing since 2012, with home prices rising relentlessly over the last seven years.  A recent article in the The Boston Globe confirmed that the home price surge has materially impacted home values in many of the Bay State’s most economically challenged communities.

Citing statistics from the Massachusetts Association of Realtors, The Boston Globe reported that the median sale price of single family homes in Massachusetts increased 33 percent from 2012 to 2018.  The Globe article went on to highlight the disproportionately greater increase in home values during those seven years in traditionally low income, former industrial cities such as Lowell, Lawrence and Lynn:

“But prices in Lawrence almost doubled in that time period, rising 95 percent; Lynn saw an 85 percent increase. Likewise, Brockton house prices have risen 97 percent since 2012, compared with 38 percent in Plymouth County.”

Why the home price surge in old industrial cities?

What’s behind the huge percentage increases in home prices in many of the former mill cities of Massachusetts?  The Boston Globe points to two factors.  First, home prices in these communities fell precipitously after the financial crisis of 2007 and the ensuing Great Recession.  The median home sale price in these hard hit areas bottomed at such low levels that their rebound since 2012 has been amplified on a percentage basis.

According to The Boston Globe, the second cause of the current real estate renaissances underway in many previously depressed Massachusetts cities is affordability: these areas offer some of the last pockets of reasonably priced housing in Eastern Massachusetts.

Affordable housing may be the initial draw, but what is making people chose to live in what were some of the most down and out areas in Eastern MA is the advantages these cities offer to younger buyers: proximity to mass transit and walkable neighborhoods close to commercial uses, restaurants and bars.

What Massachusetts really needs is more housing

While it is encouraging to hear how buyers are fueling a real estate rebound in postindustrial cities like Brockton and Fitchburg, what all of Eastern Massachusetts sorely needs is new housing, and lots of it. Exclusionary zoning, frustratingly byzantine permitting rules, and a deeply entrenched “not in my back yard” aversion to new housing have killed the construction of affordable homes in Massachusetts for many years.

Calls for the easing of barriers to the construction of housing in Massachusetts are nothing new.  These pleas and warnings have mostly fallen on deaf ears.  But until the powers that be in the Commonwealth summon the political will to untangle the modern day Gordian Knot of laws and regulations that so severely restrict housing starts in Massachusetts, we will continue to have sky high home prices and a crushingly inadequate supply of homes for sale that endanger the future economic health of the Bay State. 

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The Case-Shiller Home Price Index for Greater Boston has risen for 11 straight months, and has been powering upward since 2012.  At its most current reading of 213.48, the Index is 18 percent higher than its prior high point back in 2005, at the top of the last market cycle.  The Index now stands 43 percent above where it was in 2009, the most recent market bottom.

Boston Bubble or are high prices endemic to Greater Boston?

Current conditions in Eastern Massachusetts are so robust that the “B-word” is being bandied about in the media: There is talk about the possible beginnings of a real estate bubble in Greater Boston.

A recent editorial in the influential real estate trade publication Banker & Tradesman sought to contradict the new Boston Bubble theory.

Banker & Tradesman argues that the current low housing inventory and high home prices in Greater Boston are a natural function of supply and demand.  The editorial asserts that the booming Massachusetts economy has created so many new jobs and drawn so many new residents to the Bay State that demand for housing is overwhelming supply.  It’s the excess demand for housing, created by the vibrant MA economy, that is driving the real estate market upwards, not the speculative frenzy that characterizes an economic bubble. 

Longer view of the MA housing market cycle

That the folks at Banker & Tradesman are analyzing the Greater Boston housing market correctly becomes clear when one takes a longer term view of the market’s performance.

The bulk of the historic rise in Greater Boston home values over the last 30+ years took place during the 13-year-long bull real estate market of the 1990s and early 2000s.  From a low of 63.56 in February 1992, the Boston Index rose 185 percent to a high of 180.81 in November 2005.  Even the vicious Great Recession of 2007 – 2009, the worst national economic catastrophe since the Great Depression, failed to undo the majority of those gains.  The Massachusetts real estate market was badly dented by the Great Recession, but it did not break.  Since 2012, the Boston Index has recouped all its losses and has moved on to new highs

Don’t bet against the MA real estate market

The knowledge-based Massachusetts economy lies at the heart of the Greater Boston real estate market’s amazing price performance since the mid-1980s.  And with the advent of the life sciences and biotech industries in the Bay State, it seems highly unlikely that the Commonwealth’s economy will become moribund in coming decades.  Boston does not appear likely to suffer a decades-long loss of jobs and population along the lines of Detroit!

My point is that a future downturn in the Massachusetts real estate market (and there surely will be one) will be cyclical, not permanent.  A future downturn, even as severe as the one during the Great Recession, will not obliterate the enormous home price gains of the last 30 years. Yes, there will be ups and downs in MA home prices as economic expansions and recessions unfold in the future – that’s only natural.  But the overall trend in Massachusetts home prices seems inexorably on the upside. The overall uptrend in homes prices will endure for a good, beneficial reason: the Massachusetts economy makes the Commonwealth a wonderful place to build both a career and a future! 

So the best advice to be given to today’s beleaguered home buyers is: don’t try to time the real estate market!  Buy a home when the time is right for you. Don’t succumb to the temptation to put off buying in hopes that home prices will be significantly lower at some point in the future.   Remaining a renter and paying high rents for years in hopes that home prices will fall is a losing proposition. 

Yes, another economic downturn will come.  And yes, Massachusetts home values, at that time, will surely take a hit.  But, just as surely, another boom cycle in home prices will come as the economy recovers, as it always will.

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The seasonally adjusted Boston Index topped 202 for the first time in its history.  The Index rose for the third month in a row following a bit of weakness last spring that now looks to have been only a temporary hiatus in an inexorable climb in home prices.

Low housing inventory across the Commonwealth

Just when one could be excused in thinking that the supply of homes for sale in Massachusetts couldn’t get any tighter, housing inventories across the Commonwealth declined even further this November.

Faced with less than a 2 month supply of single family homes for sale in the eastern half of the Bay State, many home buyers  have been scouring the I-495 corridor and points further west for available offerings. As you can see in the graph above, they’re encountering scant overall supplies in the communities surrounding Franklin, MA and in the town of Franklin itself.

There are pockets of inventory in Franklin, MA

However, if you look more closely at the supply of homes for sale in Franklin by price bracket, you’ll discover that there IS significant housing inventory in town sitting unsold, but only in certain price ranges.

The sweet spot in the Franklin market is below $500K.  Homes in that more affordable price range generally sell very quickly in town. As shown in the graph above, there is extremely very low inventory in Franklin for homes priced below $500K. Buyers of these homes generally tolerate condition issues and accept the need for updating. (And below $250K, there’s basically nothing for sale in Franklin at all!)

However, with over 5 months of standing inventory, the $500K – $599K price range in Franklin is experiencing market resistance. Home sales in the $500Ks in Franklin are currently sticky, if the properties need updating.  Franklin homes asking over $500K that have older kitchens and baths, outmoded wood windows, natural (unpainted) woodwork, dated decor and old carpeting currently are languishing on the market.  On the other hand, nicely updated Franklin homes in the $500Ks will still fly off the shelf.

Lots of inventory in Franklin in the $700Ks and above $900K

If you’re trying to sell a Franklin home asking $700K+, your property better be a relatively compelling value! Pricey homes in town are having a hard time selling. That’s because as asking prices head toward and top $1M,  there generally is a good supply of  competing homes in many communities throughout the Greater Boston region. Here’s what is currently for sale asking $700K – $1.2M in the I-495/I-95 region:

That’s a lot of homes to choose from!

The higher the price point, the less the need to buy in Franklin.  To command $700K+ (and especially $900K+) in Franklin, homes generally must offer a lifestyle advantage (such as an in ground pool, beautifully finished lower level, and a large level rear year) or, for most home buyers, there’s no compelling reason to buy in Franklin as opposed to such other top drawer towns as Holliston, Hopkinton,  Norfolk, Medfield, Dover and Wrentham.

If you have any questions about how to price your Franklin home, contact Warren Reynolds.  He knows the Franklin market very well and will give you honest home pricing and positioning advice you can trust!

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Greater Boston home prices at all time high

First, here’s where home prices stand in Greater Boston in 2017:

After a brief respite this spring, the relentless rise in home prices over the last 5 years has resumed. As tracked by the Case-Shiller Home Price Index for Greater Boston (seasonally adjusted), home prices now stand just shy of the all time high set earlier in 2017.  With the Index reading for January 2000 set at 100, the current reading on the Index of nearly 201 means that Greater Boston home prices have doubled in the last 17 years.  And that’s despite the intervening 2007 economic crisis and subsequent Great Recession that savaged real estate markets in Massachusetts and across the US. 

MA economy booming while housing production languishes

While MA home values have soared since the Great Recession ended in 2012, the Massachusetts economy has been on a tear.  According to the MHP report entitled “Housing Supply in the Commonwealth” the Bay State as added over 350,000 new jobs and gained over 245,000 additional state residents over the last 5 years!  One would think that with home prices at all time highs and the state flush with lots of well paying new jobs and  nearly a quarter of a million new residents, there would be a tidal wave of new housing starts rolling across the Commonwealth.  In fact, as set forth in the MPH report, it’s just the opposite!

(Elements of two separate graphics in the MPH report were combined to create the chart above.)

Economics behind decline in housing starts?

As shown in the chart above, housing starts in Massachusetts have been noticeably low for several decades.  There are some economic factors that may have contributed to the cutback in housing supply.  A speculative real estate bubble in Massachusetts during the 1980s burst catastrophically in 1989, triggering a near economic depression in the Commonwealth in the early 1990s. The collapse of “Condomania” as the craze was called back then, left 100s of abandoned, half built housing projects across the state and led to many Massachusetts bank failures.  Lenders who survived the disaster became conservative in their new construction lending practices during succeeding years, restricting funding for housing starts in Massachusetts even as the economy recovered in the mid 1990s and early 2000s.  In a touch of irony, the lack of speculative housing projects in Massachusetts actually helped the Commonwealth weather the economic crisis of 2007 and ensuing Great Recession better than many other US states.  However, it seems obvious that conservative lending practices and economic downturns alone cannot explain the decades of insufficient housing starts in MA, which have left us with a severely dysfunctional housing market defined by outrageously high prices and woefully inadequate supply.

More insidious reason for lack of new housing starts in MA

According to the MHP report, there is one real cause of the pronounced decline in Massachusetts housing starts over the last few decades: local anti-growth zoning and permitting regulations.

Look more closely at the following enlargement of part of the image above . . .

As the MHP report so compellingly alleges, one acre lot size zoning is now the norm in the suburbs encircling Boston.  Large lot requirements increase the price of land by lowering the allowed density of its use. This in turn makes affordably priced housing nearly impossible to build.

According the the MHP report, the widespread use of restrictive zoning and byzantine permitting regulations throughout Greater Boston has strangled housing starts for decades.  For those already in place, the benefits of these anti-growth zoning and permitting regulations are real: your home’s value is protected because only very high priced new homes are allowed to be built and your community’s infrastructure and services are not stressed by any large influx of new, moderate income housing projects.

Richard Reeves, a Senior Fellow at the Brookings Institution, recently published an article on exclusionary (restrictive) zoning for RealClearMarkets.com.

In the piece, he makes the following very telling comment:

“Exclusionary zoning is a form of “opportunity hoarding” by the upper middle class, a market distortion restricting access to a scarce good (in this case, land), that restricts opportunities (such as good schools) to other children. Those upper middle class voters who oppose more mixed-use housing in their own neighborhoods are what I call “Dream Hoarders,” keeping elements of the American Dream for themselves at the expense of others.”

Unless the state legislature (called the General Court of Massachusetts) enacts housing laws aimed at liberalizing the anti-growth restrictions lurking in local zoning laws and permitting processes, Massachusetts renters and home buyers will continue to suffer though the sky high housing costs and dire scarcity that characterize the malfunctioning Greater Boston housing market. 

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The Boston Index stood at 100.92 in January 2000.  The current Index reading of 201.33 indicates that Greater Boston home values have doubled in the last 17 years. 

Home prices up 8.9% since the start of 2016

Greater Boston home prices as tracked by the Index have rocketed higher since January 2016. The first quarter of 2017 saw very strong home sales in the Bay State with sharply higher prices.  This came on the heels of a burgeoning Massachusetts real estate market in 2016. The Boston Index is currently 8.9% higher than its January 2016 reading of 185.95.

In the previous market cycle, Greater Boston home values peaked in November 2005 at 180.81 on the Index.  Severe financial instability culminating in the Great Recession caused Boston home prices to nosedive from 2006 through 2009.  2012 saw the start of the home price rebound in Greater Boston, which has essentially continued unabated until today.  Current market conditions in Massachusetts are grossly overheated.    There’s a fundamental imbalance in the market with hordes of frustrated buyers engaging in bidding wars for a woefully inadequate supply of homes for sale.

Today’s conditions are a far cry from how things stood in 2012.  Looking back with the benefit of hindsight, 2012 was THE time to buy a home in MA. Sales volume was picking up and prices were still near their market cycle low. Investment wizard Warren Buffet even called it, saying in February 2012 that there was a buying opportunity in US housing.

Good time to sell

Back to the present: if you own a home in Massachusetts, you likely have a lot more equity in it now than you did just a few years ago.  If you are on the fence about selling your current residence, you might be wise to heed classic contrarian  investing principles and sell now while you are in the midst of the current price run up.  You’ll make the most money by selling when there is so much buyer interest.  Contact Warren to review your best home selling strategies to maximize your sale proceeds!

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It’s a stupendous performance, considering that during those same 16 years we experienced two bruising stock market crashes and the worst national economic crisis since the Great Depression!

Jobs, high quality of life power MA real estate prices

Those who touted the economic benefits of renting instead of owning a home back in 2009 during the market bust look downright foolish today.  Holding real assets like real estate is clearly the winning strategy for the long run, so long as you can ride out downturns. In fact, the current run up in home prices empowers many homeowners in MA to sell their current home and trade up to another property, or location, that better serves their future needs. Contact Warren Reynolds to learn how much your current home is worth in today’s booming market!

The runup in Massachusetts home prices since 2000 is rooted in the Bay State’s dynamic economy and the high quality of life afforded by the Commonwealth.  Indeed, Massachusetts was recently named the best state in the nation by US News & World Report.

Scott Van Voorhis, a columnist for the real estate trade newspaper Banker & Tradesman, recently provided the following insights into the phenomenal economy in Massachusetts:

“Massachusetts, especially Greater Boston and the eastern third of the state, have been able to take advantage of national and even global trends that have sparked a renaissance in urban living”, Voorhis wrote. Massachusetts has enjoyed a “boom in jobs in complex fields requiring high levels of education and, in turn, drawing an influx of upwardly mobile, talented and generally well-paid professionals” into the Bay State.

All that economic vitality and the buying power that comes with it has fueled the relentless rise in Massachusetts home prices. Due to a lack of affordable new construction, the Commonwealth has been saddled with a serious lack of housing inventory during the last several years that is currently making the home buying process very difficult for many would be MA home owners.

Still, if one had to choose between living in a booming state with high real estate prices and the lower home values that come with a struggling economy, I think most people would gladly chose the former. Contact Warren to discover the true value of your current home – now’s a great time to be a home seller!

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Boston “one of the best markets in the country”

Greater Boston is “one of the best markets in the country, certainly the strongest in the eastern half of the country,” said Jonathan Smoke, chief economist at Realtor.com during his presentation at the 15th Annual Regional & Community Bankers Conference held at the Federal Reserve Bank in Boston on November 17.

“The fundamentals of Boston are strong,” Smoke said. “It’s one of the healthiest markets in the U.S. There are no signs that would point toward a slowing down of anything.”

You can read a recap of all the bullish Boston real estate presentations made at the conference here, or by following the hotlink in the image above.

2016 sales figures continue strong

2016 has been a superlative year for real estate in Massachusetts.  The seasonally adjusted Case-Shiller Home Price Index for Boston shows home prices in the Metro Boston region at record highs.

At 189.31, the Case-Shiller Boston Index currently stands 4.7% higher than its past peak of 180.81 set back in November of 2005.

Record home sales volume

Not only are Greater Boston home prices at all time highs,  a record number of single family homes has sold so far this year on  MLS-PIN, the dominant MLS in Massachusetts.

As of November 15, year to date home sales this year on MLS-PIN have reached 46,274.  That’s a 7.2% increase over the home sales volume record set in 2004 for the same year to date time period.

The time to buy is now, before the 2017 spring market

With the Massachusetts economy booming and the MA unemployment rate at new lows, 2017 looks to be a banner year for homes sales in the Bay State.  Buyer beware: home prices may head a lot higher in 2017!

Home buyers may want to try to find a home to buy now, as we head into the 2016 Holiday season.  There currently are homes and condos for sale whose sellers made the mistake of over-pricing when they entered the market last spring or summer.  Many of these sellers are now motivated to get their properties sold before the snows of winter set in.

While many prospective home buyers (your competition) are taking time off from their home search for the Holidays, there is ample opportunity this December to make offers and buy a home.  If you want to buy a home in MA, do it now before the spring 2017 market – with market conditions as they are, the “spring market” may begin very early next year!   Contact Warren Reynolds for help buying a home anywhere in the greater I-495 region!

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Overwhelming demand for housing in the Bay State powered home sales volume higher, despite a very low supply of properties for sale.

Highest first half sales totals since 2000

2016’s first half home sales volume was so high that it actually exceeded first half sales figures for every year going back to 2000.

2016’s first half sales volume easily exceeded the sales pace set at the height of the real estate boom back in 2004 – 2005.

Massachusetts home prices at all time highs

The robust nature of home sales so far in 2016 certainly is showing up as higher home prices in the Case-Shiller Boston Home Price Index.

Home prices in Greater Boston have been on a tear in 2016.  In the month most recently reported on by Case-Shiller, Boston home prices are 4.5% higher than they were at the last market peak in 2005 and now stand an impressive 26.7% above their 2009 market crash low.

Home sales in Franklin, MA also way up

The Town of Franklin, MA also saw a home sales surge during the first half of the year.

Franklin’s single family home sales volume rose a sizable 24% over the first half of 2015, almost equaling 2013’s brisk sales.

Home prices rise in Franklin, Massachusetts

Franklin’s median single family home sale price was also up for the first half of 2016.

The median single family home sale price in Franklin rose 5.3%, hitting $410,000. (The up and down fluctuation in Franklin’s first half median sale price figures seen over the last few years is due more to the relatively small sample of sales during the first half of each year rather than to any true gyrations in local home prices.)

Exceedingly low inventory of homes for sale in Massachusetts

The supply of homes for sale in the Bay State continues to dwindle.

Anything less than a four months supply of inventory indicates a strong seller’s market.  Housing inventory both in the overall Massachusetts market and in the eastern half of the Commonwealth now stands below the 4 month threshold.  The supply of homes is even tighter in the Town of Franklin and surrounding communities.

The severe inadequacy of housing supply in the Bay State is distorting the Massachusetts housing market. Low inventory is making the lives of prospective home buyers miserable because the competition is fierce for what homes there are for sale .  And perversely, the lack of supply is leading many would be home sellers who want to stay in state to decide to keep their current homes off the market, because it is so hard to find a replacement home – quite a vicious cycle!

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We got strong home sales in spades!  First quarter 2016 stats show home sales volume up 23% over last year’s first quarter.

Brisk demand for homes, especially in Greater Boston and the eastern half of the Bay State, drove sales volume skyward.  The surge in home sales during the first quarter of 2016 came on top of record home sales volume for all of 2015.

Low housing inventory driving buyers to I-495 region

For the last several years, the Greater Boston housing market has been dealing with a pronounced lack of homes to buy in Metro Boston.  Scarcity drove home prices ever higher, pushing home buyers further west of Boston in search of available homes they could afford.  By 2015, the housing scarcity had become severe as far west as the I-495 belt.

As you can see in the chart above, all of eastern Massachusetts is a low housing inventory market.  This scarcity may make it easier to sell a home, but home sellers still have to price properly to find a buyer.  There are listings in almost every town up and down I-495 that have set their asking prices way too high and have sat unsold this spring as other homes that were priced to market entered the market and sold around them.  Contact Warren Reynolds for help determining the right price to ask for your property!

The current scant supply of homes is especially challenging for home owners who want to sell their current MA home and buy back into the Massachusetts market.  It is very hard to find a good home in the town you want to live in while you hold onto a buyer for your current home who will give you time to secure your next residence.  That’s where a skilled real estate agent like Warren Reynolds comes in very handy – give Warren a call at 508-561-6259 to discuss the smart strategy for protecting your contractual rights while you market one home and seek to buy another in today’s demanding market!

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Record home sales volume

More single family homes sold in Massachusetts in 2015 than during any previous year for which MLS-PIN has data!

2015’s sales total exceeded the previous high set back in 2004 during the real estate boom of the early 2000s.  (MLS-PIN is the dominate multiple listing service in the Bay State.  It covers all of Massachusetts except Cape Cod; its records go back to 1996.)

Steady home price appreciation

With home sales volume at all time highs, you’d think home prices recorded on MLS-PIN would also have been jumping in the year just ended. But the median sale price for single family homes in MA rose only modestly (+2.6%) in 2015, according to MLS-PIN.

2015 marked the third year in a row that the median single family home sale price rose in Massachusetts.

Greater Boston home prices at record highs

2015 saw home prices in the Greater Boston area finally recover all the ground lost during the Great Recession.

The seasonally adjusted Case-Shiller Home Price Index for Boston is up 23% from its 2009 low.  It now stands (as of October 2015) above its prior all-time high set during the 2005 market peak.  (The Index is published with a two month lag, so as of this post, October is the most recent month reported on by the Boston Index.)

Home sales in Franklin, MA

In the Town of Franklin, Massachusetts, single family home sale volume recovered from a sales slow down in 2014, but failed to exceed 2013’s sales total.

A persistent lack of supply of homes for sale in town throughout the year contributed to the modest 5.5% rebound in Franklin home sales volume reported by MLS-PIN.

Franklin home prices edge upwards

The median sale price of Franklin single family homes  sold on MLS-PIN during 2015 rose slightly compared to the previous year.

The 0.6% rise for 2015 comes on the heels on a steep increase in Franklin’s median home sale price during 2014, so perhaps prices needed to take a breather in the year just ended.

What’s the value of your Franklin home?

With GE moving its world headquarters to Boston, 2016 looks to be another good year for real estate in Massachusetts!  If there’s a move in your future, contact Warren for a free, no obligation Home Value Report.  You’ll see exactly how your home fits in today’s market and learn how to maximize your property’s resale value.  Contact Warren today!

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