March 1, 2016
Inventory is low and Recovery will be slow
Banker and Tradesman in the commonwealth “Home sale prices are approaching all-time highs. The number of sales has been growing steadily upward since 2011, but the inventory of single-family homes and condos for sale is about half of what it was in 2012…” In January 2012, there were 24,372 single-family homes and 8,205 condominiums on the market, according to the Massachusetts Association of Realtors (MAR). After four years of steady decline, MAR reported last month, there were 14,291 single-family homes and 3,808 condos on the market.
“Recent increases in home prices are supposed to incentive people to sell their homes and move up or move on, at least in theory. Most homeowners who bought at the peak of the market and were underwater for years have regained equity and could now sell their homes.” Typically empty nesters would move to condos thus giving an opportunity to first time home buyers to purchase their homes. But that isn’t happening, people are staying put. According to Larry Rideout, co-owner and CEO of Gibson Sotheby’s Cambridge There are buyers and sellers across all price points. Eventually inventory will outstrip demand, but it will take some time. The bottom line is if you’re thinking about selling, this is a great time. For sellers who are waiting for the right moment, this is the right moment.”
Recovery will take hold but not for years to come. The main reason for the low inventory is that it’s notoriously difficult to get construction projects approved in both the city and the suburbs, so there’s relatively little new construction in the Bay State, said Albert Saiz, associate professor and director of MIT’s Center for Real Estate…“As the economy picks up, you start seeing the market pick up and new construction always trails demand.”
According to Barry Bluestone, professor of public policy at Northeastern University “Rental housing and condos are in short supply. As a result there’s tremendous pressure on the housing stock.” Bluestone said it’s still profitable for developers to build high-end luxury condos and subsidized low-income housing, but it’s not cost-effective to build housing for working families, largely because of the expense of getting approval for those projects… At the current rate of construction, 42,000 housing units will be built in Greater Boston over the next five years. In order for supply to meet demand, an additional 36,000 units would need to be built during that time, according to Bluestone’s research.
One in four homebuyers is looking to purchase because their rent is too high, according to a Redfin survey of 750 homebuyers this month.
That’s up from one in five in November, and up from one in eight last August. In each survey, when we asked buyers what most influenced their decision to buy, the only choice cited more frequently was a major life event, such as the birth of a child or a marriage.
Mortgage Rates Remain Relevant
Reflecting their measured financial approach, 67 percent of buyers said mortgage rates were important or very important in their decision to buy, up from 65 percent in November and unchanged from six months ago. With the Federal Reserve’s December rate hike in the rearview mirror, buyers are now more confident that rates will stay roughly the same in the next six months. Only 10 percent felt they would increase significantly, compared to 14 percent in our last survey.
Of the buyers surveyed, 33 percent said they are more inclined to buy now as compared to their intentions a year ago, up one percentage point from the previous survey and up five percentage points from the survey administered in August. Thirty-one percent of buyers felt an increased urgency to buy before prices or mortgage rates rose, down one percentage point compared to last quarter.
In a recent article from Boston Business Journal, “Residential construction starts rose 90 percent in the month of January to $487.8 million in projects, compared to $257.2 million the year prior, the Dodge data said. Meanwhile, nonresidential construction starts rose 18 percent to $354.5 million in projects, up from $299.4 million the year before.” Residential starts include both single and multifamily housing, while nonresidential projects include office, retail, hotesl, manufacturing and other buildings.
Some construction starts in Boston include:
A $93.1 million mixed-use project at 96-120 Beverly St. and 86 N. Washington St., or Parcel 1B, in Boston’s Bulfinch Triangle. A $50 million mixed-use development with parking garage at 122-148 Border St. in East Boston.
A $141.2 million office building and garage at Pier 4, located at 190-210 Pier Four Blvd. in Boston.