Call it the incredible shrinking housing market. The number of homes for sale in the Boston metropolitan area has dropped by 35% over the last year, according to a recent report by Realtor.com.
Given the current level of demand within the Boston real estate market, this will almost certainly lead to additional price gains through the end of 2013.
Each month, Realtor.com publishes a monthly housing summary with data for 146 metro areas in the United States. The report includes monthly and annual trends for listing volume, median list prices, and median age of inventory.
It was the “total listings” category that caught my eye recently. When sorting those 146 cities based on inventory reduction (decline in the number of homes for sale), the Boston housing market ranked #1. It had the largest year-over-year reduction in total real estate listings on Realtor.com.
Boston Housing Market Tops List for Inventory Decline
This is a new development. In fact, it’s the first time I’ve seen a city outside of California at the top of this list. For months, California real estate markets have dominated the list of cities with the highest level of inventory reduction. But not anymore.
It seems the California housing markets are leveling off, where inventory is concerned. And a new “batch” of metros are rising to the top of the list.
The four cities with the highest level of inventory reduction, based on June 2013 data:
- Boston, MA -35.10%
- Denver, CO -30.14%
- Boulder, CO -26.52%
- Detroit, MI -25.66%
According to the same report, the median list price for the Boston-area real estate market rose by nearly 10% over the last year. This is not surprising, given the current inventory trend in this market. When a fixed or rising number of buyers compete for fewer products, it drives prices up. Supply and Demand 101.
We will almost certainly see additional games in both list prices and sale prices, going forward.
Other Real Estate Trends in 2013
Homes appear to be selling more quickly in the Boston housing market, as well. The monthly Realtor.com report also includes the median age of inventory for all 146 metro areas. While it’s less useful than the average days on market (DOM), this metric does give us some insight into how quickly homes are selling. This is especially true when it’s viewed over a long period.
Over the last 12 months, Boston’s median age of inventory has dropped by 27%.
All of these housing trends paint the same picture. The Boston real estate market is heating up. A transformation is taking place. Market conditions are beginning to favor sellers over buyers.
I’ve been covering these trends within California’s housing markets for more than a year now. It’s a familiar pattern that goes something like this. After years of housing surplus, inventory levels began to fall sharply. This is partly the result of foreclosure-rate declines, and partly due to rising demand for homes. Suddenly there are fewer homes for sale than in the past. Home buyers find themselves competing with more buyers for fewer properties. All of this pushes home prices north, which is great for homeowners and sellers.
Is the Boston real estate market entering this phase? It sure looks that way. I wouldn’t be surprised if home prices in the Boston metro area rose by double digits over the next 12 months. The median sales price has already risen by 8.3% year-over-year, according to Zillow.
Disclaimer: This article makes forward-looking statements about various housing conditions in the Boston metropolitan area. These statements are the sole opinion of the author and should not be viewed as facts. We make no claims or assertions about future conditions within this or any other housing market. We encourage home buyers to do careful research before making an investment, and to seek help from a licensed real estate agent.