The Essex County housing market stalled in the second quarter of 2016, with sales up slightly but prices continuing to struggle.
Sales. Essex activity was a bit disappointing in the second quarter, with transactions up only 4% after a robust beginning to the year. Any kind of increase is a good sign for Essex homeowners, of course, but sales were up much more sharply in all of Essex’s neighboring counties. On the positive side, this did mark the sixth straight quarter of year‑on‑year sales growth, and rolling year sales are up over 8%.
Prices. Prices continued to struggle, dropping over 4% in the average and almost 5% at the median. After some modest price appreciation in 2015, we thought that Essex had put the correction behind and was poised for some meaningful price increases. But we’ve now had prices go down in two straight quarters, and the rolling year trend is down about 4% on both the average and the median. We still think that basic economics of supply and demand suggest that prices will go up this year if demand stays at its current levels.
Inventory. The “months of inventory” indicator measures how long it would take to sell out the existing inventory of homes at the current rate of home sales. In the industry, we generally consider anything below 6 months as a signal for a seller’s market, where tight inventory leads to multiple offer situations, bidding wars, and ultimately appreciating prices. Essex crossed that threshold in the first quarter, but a surge of new listings in the spring brought the months of inventory back to 7.6 months. Still, that’s a pretty tight market, so we would expect to see some upward pressure on pricing.
Negotiability. The negotiability indicators – the amount of time sold homes were on the market, and the rate at which sellers were able to retain their full asking price – suggested the sellers might be gaining just a little bit of negotiating leverage. The days‑on‑market fell just a day, but the listing retention rate was up to almost 100%, which is really unusual in a depreciating market. We would expect those numbers to continue to tighten in an improving market.
Going forward, we expect that Essex County’s sales activity will eventually have a meaningful impact on pricing. With homes still at historically affordable prices, interest rates low, and a generally improving economy, we believe that buyer demand will strengthen and drive modest but meaningful price appreciation by the end of the year.