Homes for sale in Essex County plummet in recent years

This week I am looking at the number of Single Family Homes (SFHs) for sale, as a follow up to last week’s Where have all the Condo sellers gone? article. In that article I pointed out that the number of condos for sale, in both Marblehead and Essex County, was down some 70% from the levels seen in the 2006/07 period, and offered some thoughts on why that might be.

The number of SFHs for sale in Marblehead has, perhaps not surprisingly, been more steady than for condos. The average on Halloween for the last decade has been 111, so we are a little more than 10% off that, although some 30% below the 2006 peak:

Source: MLS, Oliver Reports

Essex County has seen a bigger drop, of about 50% from the peak, with the number currently for sale some 30% below the average of the last decade:

Source: MLS, Oliver Reports

To be consistent with last week’s approach, I also looked at the numbers for June, not that, after last week’s exercise, I expected to see a different trend. There was, however, a small change in that the number of SFHs for sale in June was slightly above the 10 year average rather than below it.

Source: MLS, Oliver Reports

For Essex County overall, the numbers were exactly the same in June as in October: down 50% from the peak, and down 30% from the 10 year average:

Source: MLS, Oliver Reports

It is clear that the trend in the number of SFHs for sale is similar to that of condos, but to a lesser degree.

Again, I look for reasons and come up with the following:

1. There was no SFH equivalent of the “condo conversions” from former apartment buildings, a major source of supply in the boom years for condos.

2. Falling prices created negative equity, where the borrower’s equity in the property was less than the outstanding mortgage. My September article Good news for 946,000 borrowers quoted a CoreLogic report that showed that the number of homes with negative equity, country-wide, has dropped from 25% of the total to 11%, but that is still more than 5 million homes. CoreLogic also points out that nearly 20% of the houses with positive equity have only a modest amount.
These factors have naturally reduced the number of properties for sale nationally – and that applies to condos as well.

3. Locally, negative equity has become much less of an issue as the median price of a SFH in 2014 will likely be within about 3% of the prior peak, while for condos 2014 is set to record a new record high.

4. Higher unemployment and lower consumer confidence inhibited the ability and/or desire of many people to move and take on more debt.

Whatever the reasons, they do seem increasingly to be in the rear view mirror for most of us. I know there have been a lot of forced sellers in recent years, and I know there are many more who would like to sell when possible, but in an era of low interest rates I still find it interesting that real estate in general remains an asset class that has not experienced a significant increase.

I look at these possible futures:

1. The pessimists are right and all the years of low interest rates will result in a sharp rise in inflation. Answer: buy real estate as a hedge against inflation.

2. The optimists are right and the US, at least, will see growth of 2 1/2 – 3% in GDP, enough to keep unemployment at a reasonable level without driving up interest rates. Answer: buy real estate, but expect no more than modest annual price increases.

3. The pessimists are also right in that the years of excess have still not been drained from the system (especially in Europe) and that we face deflation as we go through a long period of adjustment. Answer: lobby for Ben Bernanke to be appointed head of the European Central Bank and for the Germans to forget the Weimar Republic’s hyper-inflation.(In 1919, one loaf of bread cost 1 mark; by 1923, the same loaf of bread cost 100 billion marks.)

If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty
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