Cambridge leads the way in regional housing boom

Eastern Massachusetts appears headed toward another housing boom that could turn out bigger than the last one as frenzied real estate activity near Boston begins to spread to outer suburbs and beyond, economists and housing specialists say.

The projection is based on trends in communities that historically have led the region’s housing market, particularly Cambridge. The red hot market there has already pushed the median price 30 percent above the pre-recession peak and housing specialists say it’s only a matter of time before other cities and towns follow.

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“Traditionally, Cambridge and other areas in or near Boston are first to explode in housing prices, then it spreads to Route 128 and eventually even further out,” said Mark Hickey, an economist at CoStar Group, a real estate research firm in Boston. “Cambridge is kind of the canary in the coal mine.”

The Cambridge housing market has become so hot over the past 18 months that buyers are paying an average of 4 percent above the asking prices of sellers, according to data compiled by CoStar. By comparison, sale prices in Cambridge never exceeded average asking prices during the last decade’s housing boom — or the housing boom that accompanied the dot-com era of the 1990s, data shows.

Homes for sale in Cambridge now last only about eight days on the market before they’re snapped up by buyers, compared to the norm of 50 to 70 days during the last housing boom, according to CoStar. Even at the very peak of last decade’s housing frenzy, Cambridge homes still took more than a month to sell on average.

“It’s been crazy,” said Jessica Ye, a broker at Keller Williams Realty in Cambridge, where bidding wars and all-cash offers are common when homes come on the market. “Both local and overseas buyers really want to be in Cambridge.”

The Boston area has long had a boom-and-bust housing market, largely because the region hasn’t built enough homes to keep up with population growth. When economy improves, supplies tighten very quickly, driving prices higher.

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The inventory of homes has been particularly tight in this recovery as sellers remain hesitant to put properties on market. In Cambridge, for example, property listings were 40 percent below the numbers of a year ago, according to recent data from the Massachusetts Association of Realtors.

The median price in Cambridge has climbed 23 percent in two years and now approaches $600,000 per unit, including both single-family homes and condos, according to data. Hickey said prices still have room to grow: When sale prices routinely exceed asking prices, it’s a sign that sellers can fetch even more from eager buyers.

Jan Kuypers and his wife, Eva, bought a two-bedroom condo in Cambridgeport four years ago for $410,000, and were content to just get their investment back when they decided to sell. But their real estate agent, Nellie Aikenhead of Avenue 3 Real Estate, advised they ask for $525,000.

Within a week of the condo going on the market this month, Kuypers took the highest of four bids at just over $575,000.

“It’s beyond anything we ever imagined,” said Kuypers, who is moving with his wife to California. “It’s just incredible.”

Other communities near the Cambridge and downtown Boston markets have experienced similar trends. Jamaica Plain, South Boston, Charlestown, Somerville, and Newton have also hit pricing levels above pre-recession peaks.

Across Massachusetts, however, home prices in most communities remain below peaks hit in 2005, according to Warren Group, a Boston real estate tracking firm. The state median is still down about 9 percent from its pre-recession high.

But many suburban towns are closing in on previous peaks. In areas along Route 128, real estate agents have reported high-stakes bidding wars breaking out as buyers look further north, west and south for more affordable and available housing.

Wendy Maeda/Globe Staff

36 Fairmont Street in Cambridge.

Lunenburg is a bedroom community of about 10,000, located just beyond I-495, about 35 miles northwest of Cambridge. Lunenburg was hard hit in the housing crash; the median price fell by more than half from nearly $429,000 to about $192,000 in 2009, when the market bottomed, according to data collected and analyzed by CoStar Group.

The median price, now just over $300,000, remains about 30 percent below the town’s peak. But CoStar’s analysis shows trends similar to those in Cambridge taking shape. The gap between sales and asking prices is steadily closing, from 13 percent below asking in 2011 to 7 percent below over the past six months.

That’s roughly where Cambridge was four years ago when it began the recovery that has turned into today’s hyper-competitive market.

In addition, homes for sale in Lunenburg last only 20 to 30 days on the market before they’re purchased, compared to an average of more than 100 days during the last housing boom and more than 170 days three years ago, data shows.

Joanne Rathe/Globe Staff

John Pouliot and Sondra Hart.

John Pouliot sold his waterfront condo on Hickory Hills Lake in Lunenburg in six days. He recently accepted an offer of $342,000, just 2 percent below his asking price of $350,000 and nearly double what he paid in 1995.

“I really didn’t expect it to sell so quickly,” said Pouliot, a retired purchasing manager who is moving with his wife to California.“I was very pleasantly surprised.”

Bidding-war skirmishes are also breaking out in town, said Sylvia Russo Pollastri, owner of Russo Pollastri Realtors in Lunenburg.

“It’s the ripple effect coming from the Boston area,” she said. “When you hear crazy stories of people paying so much and not finding homes there, it ripples out to us in central Massachusetts.”

Ultimately, no one knows how high prices will go. Any number of factors, from rising mortgage rates to increasing inventories to a faltering economy, could cause prices to stabilize or fall.

But one thing seems clear: As Cambridge goes, so goes Lunenburg.

Edward Glaeser, an economist and director of the Rappaport Institute of Greater Boston at Harvard University, said housing trends in much of Massachusetts extend from Cambridge and downtown Boston, making these markets a “natural bellwether.”

“It’s a very clear pattern, he said. “It’s natural for it to flow out.”

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