Essex County 2013 Condo Market Review and 2014 Outlook
The condo market in Essex County did not experience a big crash, with prices falling just 14% from their 2005 peak to 2009 low. Since then prices have recovered steadily and in 2013 were just 2% below peak levels. Sales, however, remain well below peak levels. (Click here to read my Essex County 2013 Single Family report.)
Sales numbers suggest that Essex County did enjoy some sort of condo boom in the middle years of the first decade of this century, before experiencing a very large slump. No doubt part of the reason that sales remain low is that the once popular small apartment conversions have become hard for buyers to finance, and that market shows very little sign of returning.
Distressed sales – foreclosures and short sales – accounted for fully 26% of all condo sales in 2011, dropping back to just 10% in 2013. Non-distressed sales have shown a sharp increase in the last two years.
Note that for median price and ASR (Assessed Value to Sales Price Ratio) calculations I exclude distressed sales. Most reports, from Case-Shiller to local real estate firms, take the numbers from MLS and use all sales. Since distressed sales generally take place at a significant discount to non-distressed sales, I exclude them to get a more accurate picture of underlying price trends.
The median price has recovered from the 2009 low and shown modest increases since then.
Looking back over the data in the last 12 years the highest price of the year has occurred 8 times in Q3 and 4 times in Q2. So nobody should get too excited when the first quarter numbers are announced! In fact, my basic policy is not to publish quarterly numbers for condo sales unless there is something that stands out as being significant. Even I accept that there is such a thing as too many numbers!
One of my consistent themes is that the ratio (ASR) of Assessed Value (AV) to Sales Price (SP) can give a good indication of what is happening to underlying prices. If the ASR is above 100% that means that properties are selling for less than their AV. Conversely, properties selling above their AV will have an ASR below 100%.
As we all hope our properties are worth more than the AV we look for an ASR below 100% as a positive sign. Remember that AVs are a lagging indicator: the tax bills for FY2014 are based on actual sales in 2012. Thus the 2013 sales data, reported in this review, will be the basis for FY2015 assessments.
What this means is that in a period of falling prices the ASR is likely to be rising. The ASR is the AV divided by the SP: if the SP is falling (prices going down), the ASR will rise. And when prices are rising, when the SP is rising, the ASR will fall.
So what we, as homeowners, want is an ASR below 100% and falling. Let’s look at the ASR for condos in Essex County in recent years.
This data suggests that the underlying price increase in 2013 was stronger than suggested by the median price alone. With the ASR dropping from 100.6% to 92.7% that means the median condo in Essex County in 2013 sold for 8% more than its AV as against selling at roughly AV in 2012. Because assessments change from year to year this is not a precise indicator, but it is useful.
Two years ago the month of February saw just one day when the temperature was below freezing. This year….well you know what’s it been like, hibernation for most of the month. Statistics for sales at this time of year are, therefore, largely meaningless.
Instead, I have been looking at the supply of condos for sale and comparing numbers with a year ago, which was also a cold month if not quite as brutal as this year. Bearing in mind that the median price last year was $241,000, while there is an increase in supply at the very low end, between $150,000 and $350,000 supply is down. The increase in the $750,000 – $1,000,000 market reflects a new development in Lynnfield which saw 4 sales in 2013, 4 are now pending and a further 8 currently listed for sale.
The weather will break, spring will come and buyers will emerge from their winter cocoons. With the economy strengthening, albeit slowly, there seems to be little reason to expect other than a continue gradual increase in prices in 2014.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or andrew@HarborsideRealty.com.
Andrew Oliver is a Realtor with Harborside Realty in Marblehead