Many people have been telling me for years that the real estate market is turning around. Newspapers and blogs have been enthusiastically predicted that the recession ended and everything was going to be alright. I heard the real estate market had “turned around” in 2010, but the downward trend continued. Now new data is coming forward.
All signs indicate that we are very likely skimming the bottom of the real estate bust, and things are just beginning to look up. Nationally, many other locations were much harder hit than Massachusetts. Prices and sales in the Boston area were not has hard hit as Central Massachusetts. The towns in the Wachusett Region lost an average of 25% to 30% from 2006 to 2012.
October sales numbers jumped 21%, according to the Warren Group. Meanwhile home prices spiked 4.4 percent, according to the Massachusetts Association of Realtors, which also released its October numbers. . This is the most impressive jump in median prices since the end of the $8,000 home buyer credit in 2010. Unfortunately, the Warren Group, which includes all sales in Massachusetts, not just Realtor assisted sales, has home prices staying essentially flat.
The new construction starts are down dramatically, as you can see by this chart. In 2000 there were 850,000 homes built, and by 2005 we reached an all-time high of almost 1,400,000. Today, we are lucky to see 390,000 built and they cost more than the existing homes available. The new energy and upgraded code requirements have added thousands of dollars to the cost of construction. Material costs have really started to move up as well, which makes new construction more risky. As you can see, the inventory for new homes for sale is down dramatically, at its lowest point since 1960.
Although the inventory is down in both new construction and existing homes for sale, the advice to buyers is to consider buying sooner rather than later. It is only a matter of time before the prices do start to move up and the interest rates will unlikely be better. Buy a home you love and settle in for the long haul as a wonderful place to live, not just an “investment”.
The elections are over, and if our politicians don’t push us over the “Fiscal Cliff“, I believe we will start the slow recovery of improved pricing and reasonable sales pace. Sellers will need to listen careful to their Realtors when pricing their homes, but the low inventory will help move homes. I saw the crash coming in 2005, but I never believed it would be a seven-year fall.