Dude, where are the houses?

A common refrain now is that there simply aren’t enough houses for sale to meet demand. This can be frustrating for buyers, who face price increases vastly outpacing salary growth, and bidding wars on even average properties. Earlier this month I saw a small (~1100 square feet) 3-bedroom in Coolidge Corner that received 23 offers!

Let’s look at data from the past 13 years to verify the problem is on the supply side, and not just due to increased demand.

Yep, supply is down.

In this first graph, I’ve plotted the total number of single-family and condominium listings (sold, cancelled, and expired) for each year from 2003 to 2015 for three towns. As you can see, inventory levels are far below pre-recession levels. In fact, in all three towns, inventory remains below what it was in 2010, the first full post-recession year, and below the average of the past 6 years (the post-recession years.) Newton, the most suburban of this sample, has been the most stable.

There was a small bump in both Newton and Brookline in 2015. Is that a ray of hope? Let’s see how we’re doing so far in 2016, year to date. In the next graph, I’ve plotted each year from January 1st thru May 11th only, to enable a comparison.

There was a small bump, but overall still not a great outlook. Brookline and Cambridge are well below their average level from the past 7 years (the post-recession years), at 88% and 79% respectively. Newton is doing the best, with levels this year at 99% of the 7-year average level.

You would think that as prices continue to rise, that would induce more people to sell, thus easing the supply crunch. That does not seem to have happened yet, at least not to a degree sufficient to arrest price growth, and in the meantime we are building a huge backlog of demand. From a public policy viewpoint, it’s worth examining other factors that affect supply, such as access to credit for construction, zoning restrictions, and the building permit process. In the meantime, we should continue to expect properties to sell quickly and for higher prices.

How can you help increase supply?

If you know someone who might sell if they knew how much they could get for their home, please put them in touch with me. I would be happy to perform an analysis for them to estimate the current market value of their home, and to help them think through the selling process and next steps.