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Low Inventory Leads to Slower Sales, But Higher Home Prices in February

Sales of detached single-family homes declined in February for the first time in five months, sliding 7 ½ percent (35 units) on an annual basis from the same month last year.  This is just the second decrease in monthly single-family home sales in the past 20 months, and was not completely unexpected.  The decline in sales can be attributed to today’s low inventory of homes for sale, as well as a series of strong snowstorms this winter that has delayed closings and cooled buyer activity, and the fact that 2012 was a leap year which included an additional day for transactions to close compared to this February.  Despite the slowdown in sales activity, the 429 detached single-family homes sold last month represents the second highest February sales total in the past six years – topped only by the 464 homes sold in February 2012, and is the thirteenth highest sales total for the month of February on record in Greater Boston.

The monthly median selling price for detached single-family homes increased for a fifth consecutive month in February, climbing 8.8 percent on an annual basis to $429,900.  It’s the largest percentage increase in median selling price on an annual basis since October 2012 when the median price rose 10.3 percent for the same month one year earlier, and marks the first time since July – November 2010 that the single-family median home price has risen for five consecutive months. 

Strong buyer demand, a limited supply of homes for sale, and a decline in distressed property sales, have all contributed to the appreciation in home values over the past year.  In particular, today’s limited inventory levels is producing more multiple offer situations and that’s elevating prices as evidenced by an increase of 3 percent over the past year in the ratio of original list price to selling price which rose from 91.2% last February to 94.1% in February 2013. 

Condominium sales rose steadily in February to their highest level for the month in six years.  A total of 425 condo units were sold in February 2013, an increase of 10.7 percent over the previous February’s sales volume and the most since February 2007 when 601 units sold.  This marks the fourteenth consecutive month in which condo sales have improved on an annual basis, with double-digit sales gains observed in each of those months.  Empty-nesters, entry-level buyers, and investors are all helping to boost activity in the condo market.     

Historically, this February’s sales total ties for fourth best on record for the month in Greater Boston, equaling the number of units sold in February 2004, and exceeded only by February 2007 (601 units sold), February 2005 (572 units sold) and February 2006 (540 units sold).  

The condo median selling price declined for the first time in over a year in February, decreasing 5.2 percent over the past 12 months to $350,750.  It’s the first time since January 2012 that the median selling price has softened from the same month one year earlier, and the largest percentage drop in the monthly median price since November 2011 when the median price declined 7.3 percent.  The decrease in median selling price does not suggest any substantial softening in buyer demand nor is it indicative of any long-term correction in market values, rather it reflects the fact that three luxury properties valued at more than $5 million, including one priced over $10 million, were sold in February 2012 which artificially boosted the median price, but did not accurately reflect the larger market environment at the time.

To access monthly data by community, check out our Local Market Update reports, and our Monthly Market Indicator Reports for comprehensive regional housing market data for the GBAR/GBREB jurisdiction.