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Will crazy home prices return in 2013?

Posted by Scott Van Voorhis December 27, 2012 08:11 AM

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Home sales are on track in Massachusetts for their best year since 2006, the year the real estate bubble began to burst, The Warren Group reports.

Sales of single-family homes were up 22 percent through the end of November compared to the same period in 2011, according to the publisher of Banker & Tradesman.

In fact, the number of homes sold in November was the highest since November 2005.

Yet ominously, the number of homes on the market has dropped yet again, down nearly 26 percent in November, to 5.7 months of supply, compared to 9.2 months last year, the Massachusetts Association of Realtors reports.

And given strong restrictions against new construction across Greater Boston, you can be guaranteed there will be no fresh supply of new homes to fill demand. The NIMBY-types that so often dominate development debates in towns and suburbs across the Boston area will see to that.

This growing mismatch between supply and demand is a potentially toxic combination, one that could very well lead to a return of a home-price bubble sooner than anyone had anticipated, maybe even next year, 2013.

OK, so far, prices haven't followed so far as quickly, with a relatively modest increase of 1.6 percent in the Boston metro market in October compared to October, according to latest Case-Shiller report.

Yet appearances are deceiving, with price trends often lagging sales.

We saw the reverse of this back in 2010. Homes sales fell off the cliff after the expiration of the $8,000 in April, yet prices continued to rise for a few months. However, soon enough, declines set in, triggering a double dip in home prices that we are just finally digging out of.

For all the cynics who say I am somehow cheer leading for rising prices, I blogged and wrote quite a bit back in 2010 arguing that prices, despite appearing to buck the trends, would inevitably follow sales, which were then falling fast. It's not rocket science.

Still, there is some reason to hope that sellers who have been holding back will finally take a chance and list their homes when the spring market returns in a few months.

That could relieve some of the pressure, but without new home construction, which remains at anemic levels, it may not be enough to prevent the return of runaway home prices.

Skeptical? Think prices just won't go nuts again, that the bubble years were an anomaly?

Feel free to me have it then, though I am betting you will be thinking differently come June.


This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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