Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report:
“The median existing-home price for all housing types in January was, up 5.8 percent from January 2017. January’s price increase marks the 71st straight month of year-over-year gains.”
Seventy-one consecutive months of price increases may have some concerned that current Boston condo values may be over-inflated.
However, at the same time, Zillow issued a press release which revealed:
“If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”
Here are two graphs that help show why home prices are exactly where they should be.
The first graph shows actual median home sales prices from 2000 through 2017.
Boston condos
By itself, this graph could heighten concerns as it shows home values rose in the early 2000s, came tumbling down and are now headed up again. It gives the feel of a roller-coaster ride that is about to take another turn downward.
However, if we also include where prices would naturally be, had there not been a boom & bust, we see a different story.
Boston condos for sale
The blue bars on this graph represent were prices would be if they had increased by the normal annual appreciation rate (3.6%). By adding 3.6% to the actual 2000 price and repeating that for each subsequent year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit LOWER than where they should be right now.
One area of concern is the Boston luxury condo market. in 2017, 94 downtown Boston luxury condos sold priced $2M and above with an average of 142 days on the market. In addition, 22 Boston luxury condos sold $5M and above with an average of 144 days on the market. The most expensive Boston luxury condo that sold was at 89 Beacon Street for $15,995,000.
Bottom Line
Based on historic appreciation levels, we should be very comfortable that current Boston condo and Boston luxury condos values are not over-inflated.
Updated: 1st Quarter 2018