Remember the days of crazy bidding wars and waived inspections, with homebuyers desperate to close a sale? It’s looking like those days are over, with a rapidly cooling Massachusetts housing market.
But does that mean it’s easy to buy a home now? Absolutely not, experts say.
October numbers released this week by real estate data firm The Warren Group and the Massachusetts Association of Realtors show that the market is rapidly slowing, with fewer sales closing and prices leveling out. But the flip side of that is financial factors are making homes less affordable, and there continues to be a shortage of housing overall.
“There’s very few homes for sale. The inventory keeps dropping and dropping and dropping,” said Tim Warren, CEO of The Warren Group.
According to The Warren Group, there were 4,183 single-family homes that closed in Massachusetts in October 2022, down from 5,327 in October 2021 and 6,724 in October 2020. Year to date, there have been just under 45,000 single-family home sales in 2022, a 12.9 percent drop compared to this time last year.
There has also been a drop in condominium sales, with 1,729 condos closing in October 2022, compared to 2,105 in October 2021. Year to date, there has been a 15.6 percent decline in condo sales compared to last year.
The Massachusetts Association of Realtors said new listings for single-family homes declined by 18.3 percent in October compared to September and new listings for condos declined by 28 percent.
Dawn Ruffini, president of the Massachusetts Association of Realtors, said a big problem is the lack of supply of all kinds of housing – single-family homes, apartments, and condos. She said a market is considered balanced if it has six months’ worth of inventory available. Currently in Massachusetts, it would take just 1.6 months for buyers to purchase everything listed on the market, based on the numbers of buyers looking and the number of properties for sale. “It’s very anemic here in Massachusetts,” Ruffini said.
Another reason the market is slowing is because fewer people can afford to buy. Interest rates have climbed from around 3 percent at the beginning of the year to around 7 percent now. Warren said if someone buys a median priced home in Massachusetts and pays 20 percent down, they would be paying around $18,000 more per year for their mortgage now than they would have under the lower rates. “That obviously has to get factored into your budget and has to be reflected in your offer to whoever is selling a home,” Warren said.
Warren noted that the downturn of the stock market, drops in people’s retirement accounts, and the general economic climate are also making buyers hesitate to spend more. “People are going to be more cautious if they think we’re headed to recession,” Warren said.
High mortgage rates also mean potential sellers are staying in their homes longer because they are reluctant to give up a low-rate mortgage on their current home to take out a new, higher one on a new home.
While these factors have led prices to level out somewhat – prices are no longer continually increasing at astronomical rates – they remain incredibly high. The Warren Group lists a median sale price of $520,000 for single-family homes in October, up 14.3 percent from October 2020. Condo prices have also risen during those two years, from a median sale price of $415,000 in October 2020 to $491,000 last month.
SHIRA SCHOENBERG
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