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Many Cried "Wolf" (Real Estate Bust)....But No "Wolf" Thus Far

Rajiv Laroia, Laroia Realty

Many Cried "Wolf" (real estate bust)....But No "Wolf" Thus Far

The state economy grew at nearly four times the pace of the national economy in the first quarter of 2007.  The state's economy grew at a 4.7 percent annual rate in the first quarter, the fastest pace in nearly 7 years, according to a report from the University of Massachusetts. The US economy grew at a 1.3 percent rate, its worst performance since early 2003, the Commerce Department said. This trend began in 2006 when the state economy, after lagging the performance of the national economy for several years, began outperforming it . The labor market in Massachusetts has been steadily improving with unemployment falling and job growth increasing.
In New England, the Boston Fed said that  residential real estate markets are improving, with some increases in sales and declines in inventory. Businesses are hiring for replacement but skilled positions are hard to fill.

The population decline in  Massachusetts stabilized in 2006 while Boston and adjoining areas experienced population growth. New England Economic Partnership (NEEP) expects the Massachusetts economy nominal personal income to rise by 5% this year and increase by a slower 4.3% in 2008.  Looking ahead, employment  in Massachusetts will continue to grow at a rate of 1% compared to a national growth rate of 1.5%.  Unemployment rate  is expected to remains steady around 5%  (4.5% for the Boston area) for the next few years. The continued strength in high technology spending  will provide further support for  employment and incomes.
In the first quarter of 2007, all neighborhoods of Boston, barring three, posted higher sales, according to Listing Information Network Inc or Link. Neighborhoods of Boston refer to the different sections of the city such as the Back Bay, Beacon Hill, South Boston, Jamaica Plain. Median price for a downtown condo increased 4 percent in the first quarter to $479,000.  In contrast to Link, Otis & Ahearn, a Boston real estate brokerage and marketing firm, said condo  prices in the first quarter were up 7 percent. Kevin Ahearn, Otis & Ahearn president, said his analysis included East Cambridge, where sales were up, a neighborhood not covered by the Link report.

According to Massachusetts Associations of Realtors, median selling prices of single family homes  were up 5.8% in March compared to prices in February 2007 . Median selling prices for the condominium market increased both annually and on a month-to-month basis.  Prices were up 3.0 percent over March of last year (from $270,900 in 2006 to $279,000 in 2007) and were up 3.3 percent over this past February.  There was a significant increase in the number of single-family and condo sales from this past February to March and maybe indicative an improving housing market.
The Massachusetts housing market  also  remained relatively stable in April as the number of  homes sold and sale prices remained largely unchanged compared to the same time last year.  

The inventory of residential properties (detached single-family homes and condos) on the market decreased 22.3 percent as of March 31, 2007 compared to the same time last year (from 60,373 listings to 46,910 listings in 2007).  At the current sales pace, this represents approximately 9.0 months of supply, a decrease from 11.7 months of supply in March 2006.  The downward trend in inventory continued in April  making it the fourth consecutive month in which inventory  decreased compared to the previous year.

The market is considered  to be balanced  when there is between 7.5 and 8.5 months of available housing supply.   
A total of 402 condos and single-family homes priced $1 million and higher were sold in the Bay State from January through March, compared to 321 during the same period in 2006, according to MLS PIN. In Middlesex County, single-family home and condo sales were up by 6.5 percent in the first quarter. In Norfolk County, single-family home sales rose by almost 1 percent in the first quarter while condo sales climbed 3.7 percent.

The upper end of the market  remains strong. Communities and counties closer to downtown Boston tend to benefit from this because of wealth accumulation in these areas and presence of  industries -  universities, hospitals and financial services -  that  not only  provide jobs in these markets  but also tend to be relatively stable.

"Something is disappearing from Greater Boston: office space. Landlords benefited from an improved office sector in the first quarter of this year as nearly all markets saw availability shrink and rents rise, according to a report by Richards Barry Joyce & Partners.
" Availability of office space in Boston declined in the Financial District, Charlestown, North Station, the Seaport District and the Longwood Medical Area during the first quarter of 2007 compared to one year ago.   In Cambridge, choices for prospective tenants slipped by nearly 5 percentage points while Interstate 495 saw a 2 percent decline. South Station and Midtown were the only Boston submarkets where availability increased. Space selection in the Back Bay remained flat.
"Everyone but tenants [is] in a better position than anyone imagined a year ago," said Brendan Carroll, RBJ's research director. "There's no question that we are either in an expansion or some late stages of a recovery."

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