Downtown Boston Real Estate Market Most Competitive in Years

January housing market was more competitive than ever

January was the most competitive month on record, according to a new Redfin report.

Seventy percent of offers written by Redfin agents faced bidding wars last month, an increase of 67.7% from December and up 61% from last year.

January’s housing market was more competitive than ever as buyers rushed to make offers before mortgage rates jumped further, according to the report.

At the end of January, the average 30-year fixed mortgage rate was 3.55%, up from 3.11% at the end of December and last year’s 2.65% record low. It was also the first time rates rose over 3.5% since March 2020. For the week ended Feb. 17, rates rose to 3.92%.

Redfin economists predict mortgage rates will rise to 4.3% by the end of 2022 as the Federal Reserve raises interest rates.

Redfin chief economist Daryl Fairweather said those rising rates are intensifying the already severe shortage of homes for sale as buyers feel an increasing urgency to buy and homeowners are feeling less urgency to sell. And that imbalance is fueling increased competition.

“Buyers are battling it out for the few homes on the market in an effort to lock in relatively low payments before rates move even higher, but homeowners who bought or refinanced in the last year are staying put because they don’t want to lose their rock-bottom mortgage rate,” he said in a press release.

Fifty-seven percent of homes sold during the four-week period ended Feb. 13 had an accepted offer within the first two weeks of being listed. During that same time period, asking prices rose 16% from last year to a new high as new listings fell 8% to a new low.

Townhouses faced the most competition with 72% of Redfin offers facing bidding wars. That was followed by single-family homes with a bidding-war rate of 70.6%, condominiums and co-ops at 62.9% and multi-family properties at 62.7%.

Nationally, Spokane, Washington, Sacramento, California, and Seattle had the highest bidding war rates at 83.3%, 80.4% and 79.7%, respectively, followed by San Francisco at 78.1% and San Jose at 76.5%.

Boston Real Estate for Sale

Downtown Boston Real Estate Market Most Competitive in Years

With the lowest level of Boston condo for sale inventory in nearly 40 years, the 2021 spring market has homebuyers facing a level of competition not seen in a generation.

Inventory of existing and new single-family homes for sale is at its lowest since 1982, according to recent data from the National Association of Realtors. Homes for sale hit a historic low at the end of February, at 1.07 million, the equivalent of just 1.8 months of average monthly sales of 582,917, a near-historic low. In 70% of metro areas, demand is outstripping supply.

Calling the lack of inventory “dire,” with 375 out of 381 metro areas posting double-digit declines, NAR’s report found that active listings rose in only 1% of metro areas year over year. Active listings dropped 36.7% in the Boston area, 57.5% in Springfield, 57.8% in Worcester and 63.6% in Pittsfield.

Low real estate inventory is continuing to drive up prices nationwide.

In March, listing prices rose at double-digit rates in 64% of metro areas, including Boston, where the median list price rose 10.3%. Worcester grew by 9.4% and Springfield by 15.2%.

The report found the expectation of rising mortgage rates, which are at historic lows, will continue to drive today’s demand. NAR chief economist Lawrence Yun said he expects them to hover under 3.5% for the rest of the year.