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Greater Boston’s housing market looks like it’s quickly starting to shrug off the effects of the coronavirus recession.
This may very well turn out to be the shortest and strangest real estate downturn in history.
When the real estate market heads south, sales start to soften and decline a year or more before prices weaken.
That’s what happened here in the Bay State in the run-up to the Great Recession. Sales began to lose steam in 2005, but prices, while slowing, didn’t peak until early 2006.
And the bottom didn’t fall out for another two year, when the financial crisis in the fall of 2008 sent the real estate market and economy into a tailspin.
By contrast, the bottom fell out of the home sales market in Massachusetts and across the country almost overnight this spring.
Sales plunged 13.7 percent in April as Massachusetts and states across the country went into coronavirus lockdown mode.
Overnight, millions lost their jobs in the sharpest downturn since the Great Depression.
Unusual Moves in Sales, Prices
While May numbers from The Warren Group – publisher of this newspaper – won’t be out until later this month, we will likely see another drop in sales – pending sales in Massachusetts fell 18 percent last month, MLS stats show.
But half-way through June, something remarkable is happening. After double–digit declines in April and likely May as well, home sales have rebounded, and rebounded big-time.
Pending sales across Massachusetts surged in the first 10 days of June, rising by a staggering 25 percent over same 10 days in June, 2019, Elaine Bannigan, broker/owner of Pinnacle Residential Properties said, citing those very same MLS stats.
“We are seeing strong evidence of rebound and remarkable resilience in the market,” Bannigan said.
However, it’s not just sales that are acting out of character, but prices as well.
Sure, prices typically lag sales on the way down, but usually there are signs of a slower growth as the peak nears.
Yet far from or declining or even just slowing a bit, home prices have kicked into high gear this spring, especially in already price Greater Boston, even as home sales have fallen sharply.
Home prices in Massachusetts headed into 2020 on the heels of a 3.9 percent increase, which pushed the median price to a record $400,000 in 2019.
The pace of price appreciation has accelerated, and accelerated dramatically at that, rising nearly 12 percent in April to $428,000. That’s compared to 2019, when the median price of a home in Massachusetts rose 3.9 percent, to a record $400,000, The Warren Group’s stats show.
Some Suburbs See Sales Boom
In some parts of Greater Boston, there’s nary a sign of a downturn at all.
In fact, a number of suburbs are reporting increases in both sales and prices.
It fits with a trend Bannigan and other real estate experts are reporting, a shift that is seeing some families and buyers are fleeing the city in search of more space – and room to breathe – in the wake of the coronavirus lockdown.
“We’re also seeing lots of interest from young couples who now want to leave the city,” Bannigan said. “An urban exodus is in the works for many. Lots of interesting prognostication and some polls out there, but we’re seeing it in real time.”
Most of the state’s layoffs have been concentrated in working-class jobs in restaurants hotels and construction.
The double shot of rising sales and rising prices isn’t just confined to a few wealthy outliers, but includes tony Lexington and middlebrow Littleton, ritzy Winchester and traditionally lunch–bucket Weymouth, pricey Melrose and old mill town Haverhill.
Weymouth in particular, is a standout, with sales rising 20 percent during the first four months of 2020 compared to last year, with the median price increasing 7.4 percent to $429,500.
Many more, though, saw sales slump even as prices skyrocketed, like Middleton where sales fell 15 percent, even as the median home price jumped 5.6 percent to $582,500, or Norwood, which saw prices spike nearly 20 percent to $513,250 while sales plunged by a third.
Most Homebuyers Still Employed
One of the mysteries of the current market, however, is how it can prove to be so bulletproof even as the job market struggles to recover from the equivalent of a meteor strike.
Nationally, the official unemployment rate now stands at more than 13 percent – or 16 percent if you reverse Bureau of Labor Statistics employees’ “misclassification errors.” That’s still high, though lower than what many had feared after a big rebound in employment in May.
But there is a possible explanation, and it cuts to one of the biggest long-term problems afflicting the real estate markets in Greater Boston and other high-priced, fast-growing urban centers across the country.
Simply put, the people who have been losing their jobs – front-line workers in hotels, restaurants, retail shops and other service sectors – are the least likely to be able to afford to buy a home in the first place in a market like Greater Boston.
A married couple looking to buy a median–priced house in Massachusetts needs to pull down at least $100,000, and likely more for anything close to Boston.
Scott Van Voorhis
That alone puts one near the top of the income heap.
Most people making that kind of money are working in business and professional jobs that can be done, at least in part, remotely and over the computer.
It’s not a comforting thought, especially for anyone worried about the increasingly grotesque levels of inequality in our country.
But it may very well be one reason home prices, and now sales as well, so far appear to be impervious to the worst economic downturn since the 1930s.
Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
