The incredibly tight inventory in some Boston metro markets is squeezing buyers like a cheapskate with a nearly empty tube of toothpaste, and as prices rise in some of the most desirable towns, it appears more sales are being rolled up into neighboring communities.
A comparison of Somerville and Cambridge perhaps best illustrates the tale. Both cities attract similar buyer demographics, and have already surpassed their 2005 price peaks (the Bay State housing market as a whole reached its highest prices in September 2005).
“Both markets are hot. They were hot last year, they’re hot this year. There’s no change there – in fact, if there’s any change, they’re both hotter,” said Charles Cherney, an agent with Hammond Real Estate in Cambridge.
But though buyer demand is high in both places, inventory has been slightly more abundant in Somerville, and that’s all it takes to hugely up drive sales, even as Cambridge sales have nosedived compared to last year.
In Cambridge, through the first five months of the year, the median single-family home price in Cambridge rose 14.1 percent, from $854,000 to $975,000, while the median condo price rose 15.8 percent, from $475,000 to $550,100. Meanwhile, sales of single-family homes decline 36.5 percent, from 52 to 33, while condo sales dropped 30.6 percent, from 3017 to 213.
In contrast, in Somerville, the media single-family home price was nearly flat, going from $520,500 through the first five months of 2013 to $520,000, a dip of 0.1 percent, for the same period in 2014. Median condo prices rose sharply, however, going from $399,000 in the first five months of 2013 to $491,500 through the first five months of 2014. But unlike in Cambridge, Somerville sales have largely kept pace. While single-family sales were about on par with last year – 26 so far in 2014, compared to 30 at the same time in 2013 – condo sales have skyrocketed, going from 126 through the first five months of 2013 to 182 through the same period this year, an increase of 44.4 percent.
“I’ve been doing this for 30-odd years, and I’ve never seen it like this. It’s just such a severe inventory shortage,” said Donald Norton, broker/owner of The Norton Group in Somerville. “We had a house on Albion St. here in Somerville that had been in a family for 60 years. You could live in it, but [it needed work]. It was on the market for $500,000, and sold for $540,000. We had 70 people at the open house, on a Saturday, and six offers by Monday night.”
Can’t Buy, Won’t Sell
The logjam that has long plagued the market has intensified, with many existing owners who would otherwise be inclined to sell reluctant to list their current homes for fear of either losing their current low-interest rate mortgages or not being able to find a suitable new place in today’s tight market.
“The only people who really are selling are estate sales,” said Norton. “If you’re living in your house and looking for a new one, you’re going to be out there in the market,” often competing against cash buyers prepared to go well over asking price.
It’s not just Somerville and Cambridge where the inventory crunch is getting desperate. There are indications that as people are being priced out of more desirable locations, cheaper alternatives are getting a boost. While Charlestown has seen condo sales dip 22.7 percent through the first five months of the year, from 110 to 85, condo sales are up 257 percent in East Boston, more than doubling from 14 to 50.
“Most of the buyers that I’ve talked to are being priced out of Somerville, and looking to Medford and Malden,” said Norton. “Everywhere you go – Malden is now on fire, Woburn, even Chelsea. We had a house in Lawrence which was only on the market for two weeks, an extraordinarily short period of time.”
