Fresh off the presses, here’s more evidence of just how screwed up Greater Boston’s housing market has become.
While middle-class buyers battle it out over $400,000 “starter homes,” some of Boston’s area’s toniest suburbs are suddenly awash with a surfeit of $2 million-and-up listings.
The growing inventory of super high-end homes in Boston’s suburbs mirrors a national trend that has seen listings of unsold luxury addresses balloon.
At a time when most homebuyers are frustrated by their lack of choices, with bidding wars for the most modest of homes, there is now too much to pick from at the very top of the market.
An Overload Of Luxury
Fourteen of the Boston area’s most expensive suburbs have on average well more than a year’s worth of supply of unsold, uber luxury homes. That’s more than double what would be considered a balanced market of six months, according to MLS PIN.
Most are on the North Shore or in the western suburbs.
Right now, it’s is taking longer in Andover to sell multimillion-dollars homes than just about anywhere else in the Boston suburbs. At the current pace of sales, it would take until 2020 – or 48 months – to clear out the current inventory of unsold high-end homes.
Just two have sold over the last year, with eight still on the market.
In Dover, we are looking at 2019, with 22 unsold listings over $2 million on the market and just seven sales of top-priced homes over the past year. That amounts to a more than three-year supply.
Manchester-by-the-Sea stands at 29 months (17 homes on the market and just seven sold over the last year), followed by Cohasset at 27 months (23 homes on market, 10 sold) and Marblehead, 16 months (16 on market, 12 sold).
Scott Van Voorhis
Rounding things out are Weston at 14 months, with 57 unsold $2 million and up homes, Wellesley, 11 months and 50 luxury home listings, and Concord, 10.9 months and 20 homes. Winchester, Newton, Lexington and Duxbury range from eight months of supply to four months.
Luxury sales, both of condominiums and single-family homes, have been slowing for months now in several major markets, including New York and some of its wealthy Connecticut suburbs, Miami, Houston and London.
Prices for luxury homes across the U.S. – defined as the top 5 percent of the market – fell this fall for the first time since 2012, according to Redfin.
While prices at the very top of the market fell 2.2 percent, the other 95 percent of the market rose a healthy 3.8 percent.
Many reasons are given for the drop off in sales and prices in luxury homes, in Greater Boston and across the country.
Some point to over-building on the high end by overeager luxury home developers.
The number of building permits for single-family homes is up modestly across Massachusetts this year, with most of that activity happening in the Boston area, where luxury construction dominates. In fact, in the wealthiest suburbs, and even in the next tier down, you’ll be hard-pressed to find any new home getting built that isn’t at the top end of the market.
Others blame demographic changes. The wealthier of the aging Baby Boomers are selling off their big suburban homes and snapping up condos in the bevy of new über luxury condo buildings and towers in Boston.
Unfortunately, there may simply not be enough older Millennials and Gen Xers with the kind of dollars needed to buy some of these homes.
Then there’s all the stock market turmoil we’ve seen this year, which, combined with a strong dollar, may be cutting down on flow of rich buyers from China.
Yet while all these factors are important, the elephant in the room are the ceaseless expansion of local zoning restrictions that has put a slow but steady stranglehold on residential construction, here and across the country.
Zoning: Housing’s Silent Killer
While it’s notoriously tough to build in the Boston area, we are hardly the only corner of the country dealing with this issue, with local restrictions and NIMBY attitudes creating housing shortages in other high-demand markets across the country.
A recent Obama Administration report lays the blame for severe housing shortages and rising prices in the Bay Area, New York, Los Angeles, Washington, D.C. and other high demand areas on increasingly stifling local zoning rules.
“The accumulation of state and local barriers to housing development including zoning, other and use regulations, and unnecessarily lengthy development approval processes, has reduced the ability of many housing markets to respond to growing demand,” reads the “Housing Development Toolkit” released by the White House back in September.
The report minces no words on how such NIMBYism is distorting not just the housing market but the economy as well.
“The increasing severity of undersupplied housing markets is jeopardizing housing affordability for working families, exacerbating income inequality by reducing workers’ access to higher wage labor markets, and stifling GDP growth,” concludes the report.
Yet “undersupplied,” the word the Obama Administration report uses to characterize many of country’s major housing markets, may not quite be the right term here. While there is a dire shortage of homes affordable for working and middle-class families, there has been a mini building boom of McMansions and gilded high-rise condos here and across the country.
There is a reason for that and it has nothing to do with greed. All that local red tape only makes it harder and riskier to build, and drives up the price of land. Developers respond to these pressures by focusing on luxury housing, which bring higher returns to match the higher risks.
“People have the tendency to demonize the greedy builder for putting up that big house,” said Elaine Bannigan, broker owner of Pinnacle Residential Properties. “The greedy builder is not so greedy when you look at what they had to pay for land, pay for materials, pay for labor.”
The result is that a good six to seven years into the economic recovery, the only new stuff getting built in Greater Boston and many other hot markets are luxury homes and condos well beyond the reach of all but the wealthiest buyers.
Without a major effort both nationally and locally to reduce the zoning red tape that is killing our nation’s housing market, there’s no telling when we might once again see significant new construction of new middle class housing.
And if that doesn’t qualify as a crisis that deserves an all-out effort by national, state and local leaders to tackle, then I don’t know what is.
