With Labor Day coming up Monday (too soon dammit!), which usually leads to the end of the typical summer slowdown in the Boston real estate market, what surprises can we expect for the fall market?
Here are the key factors in the Boston real estate market right now:
- Inventory of properties for sale is limited. For example there are now 697 downtown Boston condos for sale (versus 960 at the beginning of the summer). At the current sales pace, that is equal to 4.5 months of supply of condos on the market now. In certain neighborhoods, the inventory is even tighter - there are only 2.7 months of supply of South End condos for example.
- Sellers waiting for the fall. Anecdotally, I've heard stories of many sellers holding off putting their property on the market until the end of summer, after vacation season to expose their home to more buyers. This has led to the decline in inventory over the summer, and I suspect will lead to an increase soon, offering buyers more selection. Since many buyers have been waiting for a better selection to choose from, we could see some increased activity to satisfy that demand once the right condos become available.
- Price corrections. Over the summer, the prices of 376 downtown Boston condos were dropped by an average of about 5%. Seems like sellers are a bit more realistic on pricing and are willing to come down a bit to offer value to buyers.
- The end of the $8000 first time home buyer tax credit. Ending on November 30, 2009, this has been spurring buyers (mostly in the sub $450K market since there are income limits to claim the credit) to act now to make sure they get the "free money" from Uncle Sam. I suspect this activity may pick up over the next couple months before receding over the winter once the program ends (although there has been some talk of extending the program into next year).
- Boston luxury real estate market. 72 one million dollar+ condos in Boston went under agreement over the past 3 months (versus 42 in Q1 and 70 in Q2, which is traditionally a busier time of year). And that's only down 20% versus the same period a year ago. Yes, still clearly down, but by a much smaller gap than Q1 and Q2 were compared to a year ago (58% and 38%, respectively). Maybe some signs of life for the high end market.
So what's in store for the Boston real estate market?
The low end of the market ought to be very active in a rush to claim the tax credit, the high end is showing signs of life, and the economy is improving overall. I expect we'll see healthy activity pre-Thanksgiving in the Boston real estate market with mortgage rates still at extremely low levels and consumer confidence improving recently. After Thanksgiving, I certainly think we'll see a slowdown in the market (a combination of typical winter slowdown and the end of the tax credit). Heading into 2010, all eyes will be on the economy and whether or not jobs are being created by early 2010, which I think will be the key to the real estate market recovery next year. There will still be some bumps ahead for sure, but signs are looking much better that we'll see a recovery in the near future.
Enjoy the last weekend of the summer!