Scott Van Voorhis
As we head into the spring market, all signs would appear to be point up, up and away, with home sales hitting new records and Wall Street turbo-charged by fanciful visions of massive Trumpian tax cuts, a military spending spree and a trillion dollars pumped into roads, bridges and airports.
But scratch a little and you’ll see some market trends worth considering, especially when it comes to figuring out just how much longer the current real estate bash will last and whether we are truly headed towards the peak.
The blue-collar suburbs and old factory towns are typically the first to take a hit when the real estate market heads south and the last to see big gains. And since the so-called “Gateway Cities” and the lunch-bucket ’burbs are now seeing high single-digit and even double-digit home price growth, it has to make you wonder just exactly where we are in the current real estate cycle.
Either the current real estate cycle is approaching a peak or we are, once again, in uncharted waters, a familiar place during these past eight years of stop-and-go economic growth and a political world gone off the deep end.
Statewide, the median home price appears to be plateauing as it nears record levels again, rising a relatively modest 1.5 percent last year, according to data from The Warren Group, publisher of Banker & Tradesman.
But even as price increases start to slow overall, they are taking off in the state’s less affluent ZIP codes.
Some of the biggest single-family home and condominium price gains were in communities like Framingham and Worcester; Braintree and Quincy; Haverhill and Methuen; Lawrence and Brockton; Leominster and Lynn; Saugus and Everett; and Revere and East Boston.
Soon to be home to Wynn Resorts’ $2.1 billion casino, Everett posted the biggest increase of the group, with its median price jumping 15.4 percent in 2016, to $355,000, with East Boston ($415,000) just a shade behind at 14.3 percent.
Next up are Braintree ($431,000) and Saugus ($370,000), which saw increases of 11.4 percent and 10.4 percent, respectively, followed by Lawrence ($230,000), Methuen ($305,000), Lynn ($286,000) and Framingham ($390,000), where prices have gone up from just under 9 percent to nearly 10 percent.
Most also saw big increases in numbers of sales to match.
Tipping Point
It’s no mystery what’s causing the big price increases in often-overlooked communities – a growing range of buyers are finding that a middle-class income no longer means being able to buy a home in a middle-class suburb.
There’s certainly a silver lining in this news for the Lawrences and Lynns of our state. Most saw home prices tumble in the aftermath of the Great Recession and began to slowly climb out of a very deep hole a few years ago, with the pace picking up in the last year or two.
Even so, while some are now seeing double-digit price increases, most are still far from getting back to the peaks reached a decade ago.
By contrast, the toniest suburbs and urban enclaves saw home prices dip modestly with the impact of the global economic downturn, only to bounce back to new heights. Cambridge and the Back Bay and suburbs like Newton, Wellesley and Winchester have long since blown past the last price records set in the mid-2000s.
In fact, after years of torrid growth, prices are now flattening out and the number of unsold luxury homes is starting to build up. Weston and Needham, among others, come to mind.
So what to make of this all?
In your typical real estate cycle, this is what you would expect to see in the latter stages as the latecomers to the party – the lower-income and working-class communities – finally start to benefit as the market reaches or heads to its peak.
I put the question – just where are we in the current cycle? – to veteran downtown Boston broker David Crowley.
Not surprisingly, Crowley left his crystal ball at home; he wasn’t able to offer the time and date of the next real estate market crash.
That said, all things being equal – as barring any crazy, Trump-driven catastrophe just over the horizon – Crowley sees another 12 to 18 months of runway left in the current boom. Then again, that’s what he has been telling buyers and other clients for the past couple years.
So the real estate party probably won’t end this year, and maybe not next either, but who knows? These are strange times we live in, with a recovery that has felt like a depression and a stock market boom, if not triggered, then apparently fueled by one of the most erratic, mercurial and unpleasantly unpredictable leaders our country has ever had.
All that said, nothing lasts forever, and that includes the latest real estate boom.
