Posted on June 10th, 2014
It’s fairly common for Boston and vicinity to have a hot and cold housing market, primarily because the region hasn’t produced enough residential properties to keep up with its population growth, made even more challenging because home sellers are still a bit reluctant to put their homes on the market. As the economy improves and people feel good about investing in real estate again, the housing supply tightens up which causes home prices to rise as well, a good thing for home sellers.
It look’s like Eastern Massachusetts is headed toward another housing boom that industry experts are guessing may just turn out more significant than during previous years and will more than likely be spreading across the state, suburbs and all. One of these suburban communities is Cambridge which today is a red hot real estate market that has already forced the median price 30% higher than the pre-recession peak. That being said, even with this rise in median price, home prices in most of the Massachusetts’ communities are still below the peak (down by around 9%) that was reached in 2005.
Historically, Cambridge and other communities near or in Boston are the first ones to experience an increase in housing prices, followed by extending over to Route 128 and beyond. Local real estate agents are reporting that high stakes bidding wars are bursting out, forcing home buyers to begin looking further north, south and west for not just available, but more affordable housing.
In Cambridge, homes that come on the market are selling almost as fast as they are listed, being bought up by local as well as overseas buyers, in many cases in under 10 days when the norm was 50 to 70 during the previous housing market boom. The median price of homes in Cambridge has climbed about 23% in just 2 years and today is approaching $600,000 per unit, including condos and single family homes: Whenever sale prices consistently surpass asking prices, sellers have the unique opportunity to get even more money for their property from enthusiastic buyers.
Additional communities located within the downtown Boston and the Cambridge markets are experiencing similar trends, including South Boston, Jamaica Plain, Charlestown, Newton and Somerville. Just 5 miles northwest of Cambridge, just past I-495, is Lunenburg, a community of around 10,000 that was hard hit by the housing crash. The market in Lunenburg bottomed out in 2009, with median prices falling by more than half, from around $400,000 to around $190,000. Now, with the median price ranging around $300,000, home prices are still around 30% lower than they were at the peak, a trend similar that of Cambridge.
The gap between sales and the asking price of homes in the area is steadily closing, dropping from 13% below asking price in 2011 to 7% below over the last 6 months and they typically only stay on the market between 20 to 30 days. That’s close to where Cambridge was 4 years ago when the community began the recovery that has turned into the current, highly competitive market.
There’s no way of telling just how high real estate prices will go, due in part to the fact that a number of aspects can come into play including an increase in inventory, rising mortgage rates and/or a shift in local economics, all that could cause prices to either fall or stabilize.