Housing Prices in Boston– as simple as supply and demand?
Boston Real Estate and Condos for Sale
Housing Prices in Boston– as simple as supply and demand?
Will we see relief for Boston condo for sale buyers in 2024?
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Housing Prices in Boston– as simple as supply and demand?
Across the country and the state, the shortage of homes for sale is making it very challenging for buyers, according to the Massachusetts Association of Realtors (MAR) October housing statistics report released Monday.
It’s not just the limited number of listings impacting buyers. The low inventory is driving up sale prices.
October home sales in the U.S. hit a 13-year low, while interest rates started to come down, increasing buyer activity.
David McCarthy, president of the Massachusetts Association of Realtors, said several persistent variables have been affecting homeowners’ interest in selling, as well as in prospective buyers’ purchasing power — and those variables are reflected by the consistent decreases in housing affordability we’ve seen throughout the year.
“Despite these economic pressures and lack of available inventory, buyers are still interested in purchasing a home,” McCarthy said. “As the holiday season begins, the lights and decorations can create a warm and welcoming environment for homebuyers, bringing a sense of hope for both buyers and sellers alike in an unpredictable market.”
Last month, the median sale price for a single-family home in Massachusetts increased 12.8% from October 2022 to $615,000, while new, single-family home listings finally increased, up 0.8%.
The median condominium price also increased from last year, up 7.9% to $520,000. Condo listings also increased last month, up 2.2% from a year ago.
The report also found that year over year, single-family closed sales fell 15.8% from 2022, while closed condo sales dropped 8%.
As we enter the holiday season, MAR expects market activity to slow down between now and year’s end.
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When stay-at-home mandates were enforced last year, many households realized their homes didn’t really fulfill their new lifestyle needs. An office (in some cases two), a media room, space for children to learn, a gym, and a large yard are all examples of amenities that became highly desirable almost overnight.
Zelman & Associates recently reported that sales of primary residences grew by 9% in 2020. That increase in demand was met by the lowest supply of homes for sale in history. High demand and low supply caused prices to skyrocket over the past twelve months. Here are three home price indexes released most recently that show how home values have risen:
- FHFA Agency House Price Index shows a 13.9% increase
- CoreLogic Home Price Insights Report shows an 11.3% increase
- S&P Case-Shiller U.S. National Home Price Index shows a 13.2% increase
Prices increased by double digits in every region of the country and in 19 of 20 major metros. Chicago was the only exception, where prices still rose by 9%.
What does this mean to those who purchased a second home during the pandemic?
Many people didn’t want to give up a home in the city or close to their office. Instead, they purchased a larger second home farther away and moved there to stay safe and have more space. According to the same Zelman report, sales for second homes rose an astonishing 27% in 2020.
That large second-home retreat on a lake or in the mountains would demand a higher price than the average house. Let’s assume a buyer purchased such a home for $500,000. Assuming the middle 13.2% appreciation shown above, that home would now be worth about $566,000.
Those who bought second homes to improve their lifestyle during the height of the pandemic, or those who just wanted to be in a safer environment, also made a great investment.
What should these homeowners do now as the pandemic is receding, and the economy is reopening?
The buyers of those second homes now have a decision to make. Many will move back to the original home they still own (the one that’s closer to work, friends, and family). Should they keep the second home? That could depend on answers to questions like these:
- Now that you may have to go back to the office (at least a few days a week) and students are required to physically attend school, would you still use the second house enough to warrant the expenses of an additional home?
- Would you go to the second home on most weekends, or would you return to the movie theater, attend sporting events, eat out at fine restaurants, or spend your time traveling again?
Boston Condos for Sale and the Bottom Line
If you purchased a larger second home during the pandemic, you were able to make day-to-day life much easier for those important to you. You also made it much safer. However, with those goals already accomplished, you now need to decide whether to continue paying the extra expenses or sell the house and cash in your profit. If you decide selling makes sense, let’s connect today to discuss the value of your second home.
Boston Real Estate and Condos for Sale
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Boston Real Estate and Condos for Sale
I found a great blog the other day. While it isn’t solely
focused on real estate, he does have a section devoted to it. Last month the author was
writing about the Fenway, but in a wider sense, about construction in the city and supply and
demand, overall. I have cut and pasted part of his post, along with a reader’s response, and
my response to that response, below.
Housing Woes
“Steve Bailey details the troubles of the
Fenway Community Development Corporation in maintaining its own goals of affordable housing. It
seems that the Susan S. Bailis center on the edge of the South End is trying to convert affordable
units to market-rate, because the overestimation of market demand has led to a fiscal shortfall in
the project. This, Bailey argues, should give pause to the FCD’s recent obstruction of
Northeastern’s attempt to create more student housing in the
area.
…
This obstructionism is part and parcel with
a mentality that sees luxury high-rise construction as bad because average people can’t afford to
live there. The way I look at it, the more places well-to-do people have to live, the less likely
they’re going to be competing with places I might actually be looking at one day. This is not to
say that the market solves everything; it doesn’t. Nor does it mean that affordable housing
requirements in new construction are a bad thing. It simply points out that creation of new housing
is the thing above all else that’s going to ease the difficulty in the long run of average people
to afford their living space.”
Adam G’s
response:
In theory, you’re right. The problem is this is no longer a
rational market, where increased supply inevitably leads to reduced prices. Demand is down (as
indicated by stats showing houses are staying on the market longer) and yet prices continue to go
up.
When two-bedroom condos in rehabbed townhouse apartments in Roslindale
are going for $400,000, when WBZ runs ads for seminars on how to make money in real estate,
there’s something else going on beyond a shortage of units (and is there really one? Back in 1950,
Boston somehow managed to fit 800,000 people in the same basic space now occupied by barely
600,000). Can you say speculation?…
My
response:
I know this comment is coming a month after your original post,
but I just wanted to take issue with what adamg said. Actually, I don’t really know what he
said…something about 800,000 people in 1950 vs. 600,000 now. I’m not sure you can make that
comparison.
I don’t know how many housing units there were in 1950, nor do I know
how many there are now, so his comment that in 2005 we are fitting 600,000 people in the “same
basic space” as in 1950 might not be true. The city has changed drastically, since
then.
For one reason, in 1950, two neighborhoods existed that are no longer there –
the “New York Streets” neighborhood (where the Boston Herald is, now) and, of course, the
West End (where Charles River Park is, now). That might mean lower number of housing units exist
today (a fair guess, seeing how dense the West End was and how sparsely populated is Charles River
Park).
For another, the majority(?) of housing in the South End, and probably the
Back Bay, too, were rentals and single-resident-occupancy (SRO) units, meaning there was a greater
the density of people (and, in fact, there are regulations now which lower the people per floor…what
is that called, FAR?). There is less housing available to people in those two
neighborhoods.
There hasn’t been much residential construction (to-own), in fact,
since the 1950s. I can’t think of many projects, at all, except those that started within the past
five years (Ritz, Grandview, Belvedere, Atelier…wait, is that it?). Housing units have gone from
single families, as originally constructed in the 1800s, to apartment buildings and/or SROs, to
condominiums (in the 1980s) and now in some cases back to single
families.
Actually, the number of housing units in the city over time may be a very
important statistic in all of this. It warrants more research.
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