About 5 percent of the communities in the Bay State, or 17 cities and towns, had a median single-family home selling price that was more than $600,000 during the first of the year.
Most of the communities are concentrated just west of Boston and have historically featured some of the highest home prices in the commonwealth.
According to The Warren Group, which collects real estate statistics from the registries of deeds throughout the state, the following communities had a median selling price for single-family homes that exceeded $600,000 during the first two quarters of 2003: Weston ($1.2 million), Chilmark ($1.1 million), Dover ($917,000), Brookline ($834,200), Lincoln ($841,813), Carlisle ($775,000), Wellesley ($730,000), Nantucket ($687,500), Concord ($722,000), Cohasset ($732,250), Sherborn ($689,000), West Tisbury ($657,500), Cambridge ($640,000), Lexington ($623,600), Newton ($622,500), Winchester ($614,000) and Sudbury ($606,000). The Warren Group is the parent company of Banker & Tradesman.
The list has grown to include at least six more communities than a year ago. The median selling price for single-family homes in those six communities – Cambridge, Lexington, Newton, Sudbury, West Tisbury and Winchester – was less than $600,000 but in the $500,000 range in 2002 and during the first half of last year, according to The Warren Group.
“It is very clear that [prices] in the western suburbs of Boston have been escalating rapidly over time,” said Peter P. Casey, a Weston real estate broker and president of the Massachusetts Association of Realtors.
While the city of Boston isn’t included on the list, the city’s neighborhoods of Beacon Hill, Back Bay and South End – where the median selling price for a single-family home last year was $1.3 million – are likely to end the year with a median selling price that’s higher than $600,000.
The home price appreciation has occurred as the state’s economy has slowly started creeping toward recovery. The state lost roughly 150,000 jobs from January 2001 to May 2003, but unemployment took a slight dip in September to 5.7 percent. The New England Economic Project recently forecast that about 98,000 jobs will be created in the Bay State in 2004 and 2005, representing recovery of about two-thirds of the jobs lost.
“Despite a relatively weak economy, there continues to be increases in home prices,” said Barry Bluestone, director of the Center for Urban and Regional Policy at Northeastern University. “While there’s been a little softening in the rate of price increases, prices continue to rise.”
Among the key factors pushing prices higher in most of these communities, according to Bluestone, are “severe” zoning and land-ownership patterns that have restricted the amount of housing being built.
“These communities are quite exclusive and the number of new units is limited,” he said.
Northeastern’s Center for Urban and Regional Policy is working with the Commonwealth Housing Task Force to unveil a proposal next month that calls for providing incentives to communities to create new zoning to allow the development of denser housing.
Most of the communities with median selling prices greater than $600,000 have traditionally been desirable places to live for executives and professionals because of their close proximity to Boston and for the amenities and quality of life they offer, including stellar schools, according to Casey.
In addition to the strong demand, rising land costs and the construction of new mansions in several of these communities, including Weston, Lexington and Sudbury, have contributed to the skyrocketing median housing prices, explained Casey.
In recent years, several Bay State communities west of Boston have experienced a wave of “mansionization,” which refers to the trend of homebuyers and developers buying homes, tearing them down and replacing them with large, million-dollar homes.
Casey said the cost of land is at the root of the trend. In communities like Weston, where the median selling price surged 33 percent from $900,000 during the first half of 2002 to $1.2 million in the first two quarters of this year, it’s “virtually impossible” to find a piece of buildable land for less than $1 million.
“The land has gotten so valuable [that] the homes that are bought and torn down need to be replaced by larger and more expensive homes,” he said. “The new construction is what has heated the market.”
The sky-high housing prices in the Boston area have troubled local leaders and economists who worry that housing costs may be driving people out of the state.
“For the first time in my recollection, the business community is truly worried about the impact of these housing prices on the ability of the commonwealth to attract the labor it will need and retain the labor,” said Bluestone. “Housing has become a key component of an economic development strategy.”
A report by the Greater Boston Chamber of Commerce and The Boston Foundation released last week found that high housing costs were one of the factors that were discouraging recent college graduates from the staying in the Boston area.
The report showed that 50 percent of 2003 graduates from 10 institutions in the metro Boston left the state. But with almost 200,000 residents between the ages of 20 and 34 living in Boston – representing 33 percent of the city’s population – Boston has one of the highest percentage of young adults, according to study released last week by the Boston Redevelopment Authority. Boston has retained more young people than other big cities in the country, according to the BRA study.
Facing the ‘Inevitable’
Yet most of these young people just starting their professional careers are not likely to be able to afford a mortgage for a home in a community like Dover, where the median selling price for a single-family home jumped 25 percent from $736,000 in 2002 to $917,000 through August of this year.
In Dover, there has been a good deal of new construction but not as many home demolitions as in other towns. “There is a lot of new construction. It’s not so much mansionization,” said Robert Byrne, broker-owner of Century 21 The Alexanders in Needham. “It’s [Dover] one of the areas where there’s still some land to build on.”
Most of the town, however, relies on private septic systems and wells and someone who wants to build a home must have at least an acre to accommodate the systems, he explained.
People are drawn to Dover for its pastoral setting, according to Byrne, and relatively easy commute into Boston. Commuters have the option of going into Needham, Wellesley, Medfield, Westwood or even Natick to take the train into Boston.
Meanwhile, communities like Newton and Brookline, have become even more desirable because of their accessibility to Boston. MAR’s Casey said many homebuyers seeking to shorten their commutes to their jobs in Boston and avoid traffic congestion have opted to purchase a residence in Newton and Brookline instead of a community like Weston. Both Newton and Brookline offer public transportation options and boast strong school systems.
“In the mind of most buyers, what comes first is the commute to work,” said Casey.
Brigitte Senkler, a real estate agent with Coldwell Banker Residential Brokerage in Concord, said buyers are also drawn to the character of many of these communities – like Concord, Lincoln, Sudbury, and Weston.
“The towns have been preserved and there is lots of open space,” she said. While Senkler agrees that there has been some new construction, the supply of homes has not kept up with the demand, she said.
As the economy started to deteriorate, many homebuilders became much more cautious about constructing new mansions, said Senkler, who was recently ranked the sixth-most-productive Coldwell Banker sales associate in the world. “You don’t see builders right now buying and tearing down homes,” she said.
The very high-end of the residential real estate market in communities like Concord has struggled in the last year and negotiations between buyers and sellers in the high-end market is much more intense today, according to Senkler.
As for the mostly resort coastal communities, like Cohasset, Chilmark and Nantucket, with median selling prices exceeding $600,000, Casey theorizes that they have benefited from investors who instead of pumping money into the stock market, have chosen to purchase second homes instead.
In addition, the supply of homes in those vacation communities is limited, helping to drive prices up.
Some real estate industry leaders are expecting the housing prices to continue steadily appreciating in the years ahead. When asked whether the number of communities where the median selling price is over $600,000 will only grow next year, Casey said “absolutely.”
“It’s inevitable,” that prices would increase, said Casey, “unless we see a substantial change in the economy or substantial increases in the interest rates.”
But Casey said he doesn’t foresee a steep increase in interest rates unless there is such high inflation – “hyper-inflation” – that the Federal Reserve sees the necessity to take extraordinary measures..
“The economy will continue to improve, I hope, at a relatively slow pace,” said Casey. “At some point, maybe in the next three months, the unemployment rate will start to go down.”
As people start to realize that the economy is well on the road to recovery, consumer confidence will pick up and statewide prices will continue to appreciate but not as sharply as they had two to three years ago, he added.
“The softening economy has temporarily slowed down the growth of these prices. When the economy begins to recover … unless there’s an increase of supply, the price [appreciation is] going to accelerate,” said Bluestone.
Aglaia Pikounis can be reached at apikounis@thewarrengroup.com.
