To the surprise of absolutely no one, July was another record month in real estate.
Sale prices hit record highs for the month, according to analysis from The Warren Group, publisher of Banker & Tradesman. The median single-family home sale price increased 6.3 percent to $407,000, up from $383,000 a year earlier. The median single-family sale price has exceeded $400,000 for two consecutive months.
The number of sales in a given month has bumped up and down in this year’s spring market; for single-families it was down for the month versus 2017 in every month except April. The number of condo sales was down in January, June and about even in March. Both figures jumped in July, by 6.8 percent and 5.2 percent, respectively.
Fortunately for those of us who never took statistics or economics classes in high school, the reason for the surge in prices is a simple one: the demand far outstrips the supply. Unfortunately, the reasons for the reduced supply are far more complicated.
The supply problem doesn’t lie in the number of homes listed for sale; for the year, generally speaking, listings have been up over 2017 for both single-family homes and condominiums, according to analysis from the Massachusetts Association of Realtors.
The real problem is demand: the actual number of active listings has been down every month this year, MAR said, and July had the lowest number of homes for sale for the month since 2004. Inventory has been dropping for years, not because there are no listings, but because many of those listings are under agreement within 48 hours of going live on MLS.
Scott Van Voorhis this week spoke with NAIOP Massachusetts CEO David Begelfer, who said “our biggest threat is success, not a recession.” Begelfer was referring to rising construction and land costs in the CRE industry, but his point applies to the residential market as well.
Land isn’t getting any cheaper and construction costs are not falling. Worker shortages are becoming a real challenge – and there’s no way a construction worker is going to abandon booming Boise to move to Boston where, guess what, she can’t afford to buy a house.
This is not just a Boston problem. Home construction per household is now at its lowest levels in nearly six decades, according to researchers at the Federal Reserve Bank of Kansas City, and that’s pushing up prices across the nation.
The ramifications go far beyond housing prices. It’s being reflected in our country’s culture – the cities and suburbs are expensive and full of snobby elites, and the poorer rural areas don’t have jobs, but they do have drug problems (or at least, that’s the perception).
It’s another example of the widening economic divide in America. Diversity of housing types, and the people who live in them, could be a board in the bridge across that chasm. But that will never happen if we are content to remain victims of our own success.
