Massachusetts 2017 Full Year Housing Report
What Changes Can We Expect From Housing In 2018? To close the year, the Massachusetts market remains steady By John Tarducci, MIRM, Senior Vice President, New Development Services Division, William Raveis Real Estate, Mortgage & Insurance Just before the close of 2017, President Trump signed the Tax Cuts and Jobs Act into law. What does the final bill ultimately mean for current and potential homeowners? According to the National Association of Home Builders, the tax law is anticipated to boost growth in gross domestic product by 2.6 percent in 2018, spurring job growth and wage increases. This, combined with the lowered tax rate for many individual filers, is expected to keep the housing market on its steady, upward climb. In many cases, the new bill s biggest impact will be on the tax liability of renters versus buyers. Under prior tax code, homebuyers were incentivized with larger deductions available for mortgage interest and property taxes. Under the new bill, with the standardized deduction being doubled, the overall liability of renters and buyers will come much closer together. The real question will become whether or not this change will truly disincentivize renters from entering homeownership. Is a potential tax break really the driving force behind many s decision to buy? Or are their homebuying inclinations more heavily influenced by their idea of the American dream? The next year will certainly be telling for the actual impact of the tax bill on housing. 1
Housing Permits Rise in 2017 To close 2017, permits in the Commonwealth of Massachusetts saw an increase of 15.2 percent, climbing from 13,332 in 2016 to 15,348 in 2017. decreased, across the board, including a decline of 18.5 percent in 3-4 Units, 5.6 percent in 2-Units and 1.3 percent in 1-Unit structures. The entirety of this increase can be attributed to growth 5+ Unit structures, which increased 32 percent year-over-year, accounting for 9,060 of the total permits in 2017. All other unit types New Housing Permits by Type (Percent Change 2016 vs. 2017) TYPE Single Unit 2 Units 3-4 Units 5+ Units Total % DIFF. -1.3% -5.6% -18.5% +32.0% +15.2% 2
Single-Family Market Finishes the Year Ahead 12,000 +1.20% -1.10% +3.40% -3.60% +2.60% -0.80% -1.40% +0.60% -0.70% 11,000 10,000 2017 2016 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2017 Units 2016 Units Bristol Essex Hampden Middlesex Norfolk Plymouth Suffolk Worcester Total 4,805 6,247 4,086 11,028 6,440 6,135 1,357 8,352 51,123 4,748 6,318 3,953 11,441 6,276 6,184 1,376 8,299 55,539 State of Massachusetts Single Family Units Sold by County 2016 vs. 2017 In 2017, Single-Family Home Sales in the Commonwealth of Massachusetts decreased.7 percent, from 55,539 at the close of 2016 to 55,123 in the same period of 2017. On a county-by-county basis, increases were seen in Hampden County at 3.4 percent, Norfolk County at 2.6 percent, Bristol County at 1.2 percent and Worcester County at 0.6 percent. Meanwhile, decreases were experienced in Plymouth County at 0.8 percent, Essex County at 1.1 percent, Suffolk County at 1.4 percent and Middlesex County at 3.6 percent. Averages Sales Price for single-family homes in Massachusetts increased 6 percent through 2017, from $466,884 to $494,738. Increases were seen in Suffolk County (15 percent), Essex County (8.6 percent), Plymouth County (7.4 percent), Norfolk County (6.5 percent), Bristol County (6.3 percent), Middlesex County (6.2 percent), Worcester County (5.5 percent) and Hampden County (3 percent). To round out the year, Average List Price increased 12 percent, Months of Supply fell 20.9 percent and Price Per Square Foot increased 5.1 percent. 3
Massachusetts Single Family Home Sales Single Family Marketplace Home Sales Full Year 2016 vs. 2017 NUMBER OF UNITS SOLD AVERAGE SALES PRICE COUNTY 2016 2017 % DIFF. 2016 2017 % DIFF. Bristol 4,748 4,805 +1.20% $316,284 $336,295 +6.30% Essex 6,318 6,247-1.10% $470,549 $511,226 +8.60% Hampden 3,953 4,086 +3.40% $204,234 $210,327 +3.00% Middlesex 11,441 11,028-3.60% $623,984 $662,824 +6.20% Norfolk 6,276 6,440 +2.60% $616,260 $656,203 +6.50% Plymouth 6,184 6,135-0.80% $403,152 $432,834 +7.40% Suffolk 1,376 1,357-1.40% $626,079 $719,753 +15.00% Worcester 8,299 8,352 +0.60% $292,256 $308,313 +5.50% STATEWIDE 55,539 55,123-0.70% $466,884 $494,738 +6.00% Single Family Marketplace Months of Supply 2016 vs. 2017 COUNTY 2016 2017 % DIFF. Bristol 4.20 3.40-19.10% Essex 3.40 2.70-21.40% Hampden 4.60 3.60-21.30% Middlesex 2.80 2.20-21.40% Norfolk 3.30 2.50-23.80% Plymouth 4.20 3.60-16.10% Suffolk 2.80 2.20-21.00% Worcester 4.20 3.20-25.10% TOTAL 4.10 3.30-20.90% 4
Massachusetts Condominium Sales and Prices See Growth in 2017 To finish 2017, we saw Units Sold increase for condominiums in the Commonwealth of Massachusetts, up 1.3 percent from 21,653 in 2016 to 21,924 in 2017. Many counties experienced gains, including: Plymouth County at 17.8 percent, Worcester County at 7.4 percent, Essex County at 6.5 percent, Norfolk County at 6.4 percent and Suffolk County at.3 percent. Bristol County remained Full Year 2017 vs. 2016 Unit Sales 1.3% Avg. List Price 16.2% Months of Supply 19.1% neutral, with 852 units sold in both 2016 and 2017, while both Hampden and Middlesex Counties experienced slight declines, falling.4 and 7.1 percent, respectively. Averages Sales Price of condominiums in Commonwealth of Massachusetts increased 4.8 percent, from $452,028 to $473,605. Increases were seen in Essex County (9 percent), Middlesex County (7 percent), Bristol County (6.6 percent), Norfolk County (5.7 percent), Worcester County (5.5 percent), Plymouth County (5.3 percent), Suffolk County (4.7 percent) and Hampden County (1.7 percent.) To round out the year, Average List Price increased 16.2 percent, Months of Supply fell 19.1 percent and Price Per Square Foot increased 4.4 percent. 5
Massachusetts Condominium Sales Condominium Marketplace Home Sales Full Year 2016 vs. 2017 NUMBER OF UNITS SOLD AVERAGE SALES PRICE COUNTY 2016 2017 % DIFF. 2016 2017 % DIFF. Bristol 852 852 0.00% $204,566 $218,067 +6.60% Essex 2,769 2,950 +6.50% $294,147 $320,721 +9.00% Hampden 520 518-0.40% $157,657 $160,340 +1.70% Middlesex 6,312 5,864-7.10% $460,697 $492,855 +7.00% Norfolk 2,276 2,421 +6.40% $447,487 $473,024 +5.70% Plymouth 1,037 1,222 +17.80% $310,166 $326,673 +5.30% Suffolk 4,768 4,784 +0.30% $764,553 $800,401 +4.70% Worcester 1,700 1,825 +7.40% $219,865 $231,918 +5.50% STATEWIDE 21,653 21,924 +1.30% $452,028 $473,605 +4.80% Condominium Marketplace Months of Supply Full Year 2016 vs. 2017 COUNTY 2016 2017 % DIFF. Bristol 3.70 2.70-26.60% Essex 3.20 2.30-29.60% Hampden 5.30 4.30-19.30% Middlesex 2.00 1.60-19.40% Norfolk 2.60 2.10-16.30% Plymouth 4.30 3.30-22.20% Suffolk 2.30 2.30-1.40% Worcester 4.00 3.00-25.50% TOTAL 3.00 2.50-19.10% 6
Disruptive Forces for Builders For builders across the country, unfilled construction jobs, a shortage of buildable lots and price of lumber continue to hinder production of new construction. Softwood lumber futures, specifically, remained a problem in 2017. A combination of tariffs imposed by the U.S. Commerce Department, stalled negotiations between the United States, Canada and Mexico, and historic hurricane activity, led lumber futures to their highest levels since 1995. The lack of affordable building material, skilled labor and buildable lots, which stifle new construction starts, is also contributing to a severe lack of inventory. Across the Northeast, Monthsof-Supply have been at historic lows, which creates a vicious cycle--homeowners are staying put longer than they might have because there just aren t may viable move-in-ready options. This leads to the perception of decreasing demand, which disincentivizing builders from investing in new construction. Meanwhile, new homeowners are clamoring for affordable starter homes. And around and around it goes. And finally, and perhaps most interestingly, there s Amazon. The online retail giant has recently proved that no industry is too big for them to tackle--from developing smarter brick-andmortar storefronts to diving into the healthcare marketplace. Could the housing market be next? As they get closer to identifying a location for Amazon HQ2, a second headquarters with a planned employee count of 50,000, the answer is: maybe. The 20 municipalities, including Boston and New York City, Amazon has identified in the second phase of their search have devised in-depth plans for housing, transit, accessibility and education to try and woo the Company to them. But when the time comes, will Amazon leave housing decisions for 50,000 new and relocated employees to be decided by the industry s status quo? Or will they do what the company was founded on, and find a way to innovate and, possibly, do it better? Only time will tell. 1.https://www.nar.realtor/tax-reform/the-tax-cuts-and-jobs-act-what-it-means-for-homeowners-and-real-estate-professionals 2. https://www.cnbc.com/2017/04/25/trumps-canadian-lumber-tariff-could-cost-us-homebuyers-about-1200.html Massachusetts Connecticut 2017 2015 Full Full Year Year Housing Report 7
Conclusion In conclusion, while uncertainty looms ahead for how the new tax bill will impact the housing market, it isn t stopping current market growth. For the most part, Unit Sales and Average Sales Price continued to rise in 2017 across the Northeast, a trend we anticipate will continue into 2018. However, shortened supply remains a significant issue that shows no signs of resolving itself. Builders remain pressured by material costs, a lack of labor and fewer viable lots, even while potential homebuyers are calling for more inventory. Over the next twelve months, economic growth under the next tax bill will have a marked impact of the overall growth in new construction. John Tarducci, MIRM, CMP, CRB Senior Vice President William Raveis New Development Services John.Tarducci@Raveis.com RaveisNDS.com o: 203.925.4587 c: 203.640.6930 Credits and Resources 1. Information contained herein is based on information obtained from MLSPIN and is deemed accurate but not guaranteed 2. Metro Service Area (MSA) housing permit data source: U.S. Census Bureau Compiled by HUD Research 3. Not all Massachusetts counties are made part of this report. This report focuses on the eight eastern counties (Bristol, Essex, Hampden, Middlesex, Norfolk, Plymouth, Suffolk, and Worcester). 8