In 2000, just over 1.5 percent of Massachusetts Single Family Sales secured a sales price of more than $1 million. For the next seven years in a row, the percentage of Mass single family sales that topped the million mark consistently increased, until an incredible 4.26 percent of all the single families that sold in 2007 had seven figures in their sales price. That means in 2007, more than 1 out of ever 25 sales in MLS single families garnered a million dollars or more. Incredible!
Seven years after the rise in million dollar single family sales had begun, MLS statistics show the total single family sales transaction had gone down about 5 percent (from 43,283 in 2000 to 41,037 in 2007) — but the percentage of Mass homes selling for over a million dollars had increased about 258 percent. What caused the increase in popularity of million dollar sales? Certainly one factor was that the whole market was appreciating. MLS reports show the median price of a single family home in 2000 was $228K, but by 2007 the median had appreciated more than 50 percent to $343K. While there is never an equal appreciation rate, certainly this appreciation propelled some homes that would have sold below the million dollar mark in 2000 to break that mark some time between 2001 and 2007.
Another contributing factor for the increased percentage of luxury sales is that as the prices for housing increased month after month (after-month), and real estate investment was getting a reputation for being a sure thing, the big payoff attracted investors, developers and speculators. In that time period, I met a lot of people who, as other parts of the economy cooled, sought out real estate investment as a hot new endeavor. MLS shows that 185 of the million dollar sales that occurred in 2000 had been built in the previous five years, 1995 or after. In 2007, however, the number of million dollar single family sales constructed in the previous five years had nearly triple to 504.
Another consideration is the general health of the real estate market. If, in a good market, you successfully sell your million dollar home, you’re most likely in the market for another million dollar housing purchase. We are seeing now that the health of the market is just as important in good times as it is in bad times. For example, in the good market of 2007, MLS statistics show that about 43 percent of the listings priced over a million dollars found buyers. As the market changed in 2008, only 37 percent did and by the time we were deep in the recession in 2009, just 30 percent of million dollar listings found buyers. The low percentage of million dollar listings selling not only reduced the percentage of Mass homes sales over a million dollars to the lowest percentage since 2003 (2.9 percent), but also led to the fewest million dollar single family sales since 2002 (1106 sales).
About David Bates
David Bates is a top producing real estate agent who has sold condominiums, single families, and investment property in a variety of Boston neighborhoods and many of the city's better suburbs.
His insights appear not only in in this original content blog, but also in the most established local media, including Banker and Tradesman, Boston Magazine, Boston.Curbed.com, The Boston Globe, The Boston Herald, Bloomberg News and NECN.
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