Navigating the Real Estate Market in COVID-19
As we make our way through this time of drastic uncertainty in Boston and beyond, we wanted to revisit property sales data from the last 15 years. Our hope is that this data may serve as a tool to evaluate the benchmarks that have shaped our perception of the Boston real estate market for a cycle and a half. Traditionally, less liquid real estate markets do not mirror the more liquid (and volatile) equity markets (S&P is down 23 percent from its peak in February 2020 as of this writing). We don’t expect any change in that regard as we work our way through what is likely to be downtimes for at least 6 to 12 months in Boston area real estate sales. It may even be comforting, to some, to point to the last downturn and observe that the bottom of that market occured in 2009 and was only a 7.75% drop from the peak pricing that was observed in 2006 and 2007 (coincidently, Boston averaged the exact same $/SF on condo sales in those two years). Most importantly, the growth that can be seen in the chart below over the last ten years is simply remarkable. Boston pricing (in terms of $/SF) AVERAGED 6.4% growth per year for a decade. Put another way, if you purchased a $1M condo in 2009, it is likely worth more than $1.85M in early 2020. Taking it a step farther, if you put 20 percent down ($200,000) on that $1M purchase, you would have quadrupled your equity in a decade!
As the global economy recovered following the Great Recession and the Boston housing market mapped its course ever higher, the average days on market (DOM) for each listing trended inversely. From 2006-2011, the average DOM for condos in Boston was 105, while 2013-2019 averaged 46. This 56% decrease can largely be attributed to an extremely healthy economy with vast employment opportunities, rising wages and increasing Boston population. Thus, the ultimate recipe: demand outpacing supply.
Over this same period of time, the number of units sold hit its nadir in 2011 at 3,548, while the most sales were booked in the previous bull market of 2005 (4,687 total sales). In 2019, 4,372 units were sold (7 percent less than 2005 but 23 percent higher than 2011). Overall, the for sale inventory has remained relatively consistent over the last 15 years with an average of 4,250 sales per year.
Ultimately, the spring 2020 real estate sales market appears like it will be wiped out. With social distancing and isolation the themes of March and April, sales (and construction) will take a back seat until at least May and more likely June. At that point, the pent up demand for purchases (and sales) may be real but the impact this period of inactivity has on the economy is still to be determined. We will continue to monitor the economic and public health impacts from COVID-19 in its relation to the Boston Real Estate market and provide daily updates on any and all new happenings on our website. Stay well!
