Mortgage interest rates are almost double what they were a year ago, but the prices of single-family homes and condominiums in Massachusetts continued to set new records and erode paths to homeownership in July, real estate market analysts said.
The Warren Group's report on July sales activity showed that sales of both single-family homes and condominiums declined year-over-year last month, down more than 23% and more than 14%, respectively. But with intense competition for the relatively scarce inventory of homes and condos for sale, median sale prices reached new all-time highs for July last month.
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"Demand is obviously still strong among prospective buyers, but inventory can't keep up," Cassidy Norton, associate publisher and media relations director at the real estate data firm The Warren Group, said.
More on the numbers
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There were 4,085 single-family homes sold in Massachusetts in July, down 23.1% from July 2022's 5,314 transactions. The median sale price of a single-family home climbed 4.3% from last July to the new monthly record high of $610,000, The Warren Group said.
Through the first seven months of 2023, there have been 22,657 single-family home sales across Massachusetts, a drop of 24.6% compared to the first seven months of 2022. And the year-to-date median sale price of a single-family home has increased 2.3% compared to the same period in 2022 to $565,000, The Warren Group said.
As of Monday, the average interest rate on a 30-year fixed-rate mortgage was 7.247% APR, according to Zillow data compiled by NerdWallet. A year ago, the average interest rate was 5.267%, NerdWallet said.
This Back Bay condo sold for $30M, one of the highest prices in Boston history
Theresa Hatton, CEO of the Massachusetts Association of Realtors (MAR), said summers generally bring "a hot real estate market," but that the state's chronic lack of inventory is holding the Bay State market back from achieving year-over-year growth.
"With the competitive buying market, we are seeing, many potential sellers are refraining from listing their homes due to the attractive existing mortgage rates they have combined with the stress of entering the buyers' market after their current home sells," Hatton said in a statement.
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MAR said that new listings in July decreased by 26.7% for single-family homes and by 17.6% for condominiums, year-over-year. Year-to-date, new listings compared to 2022 are down 25.1% for single-family houses and down 20.6% for condos, MAR said.
The competitive market and scarcity of homes for sale has been a boon to sellers. MAR said the single-family homes that sold in July went for an average of 102.9% of their original list price.
Condo sales activity and prices largely mirrored the single-family home market in July, The Warren Group said. The month's 1,886 condominium sales marked a 14.3% decrease from the 2,201 condo sales in July 2022, but the median sale price increased 6.5% year-over-year to a new all-time July high of $555,000. So far in 2023 there have been 11,270 condo sales in Massachusetts, a 22.2% decrease compared to the first seven months of 2022, and the median sale price has climbed 4% to $519,900.
"Historically, condos have been a more affordable alternative to single-family homes, but with the median price hovering above $500,000 for the last three months, prospective buyers will be hard-pressed to find an easy route to homeownership," Norton said.
The unaffordability of housing in Massachusetts accelerated as the pandemic hit in 2020 and has led to housing insecurity for many Bay Staters at the same time that the state is seeing a hard-to-manage surge of immigrant families coming to Massachusetts in search of shelter and work.
When Gov. Maura Healey rang alarm bells about the shrinking capacity of the state's emergency shelter system and declared an emergency, she said that one of the reasons that "we find ourselves in this situation" is the state's "long-standing shortage of affordable housing."
The high cost of living in Massachusetts also puts a damper on the state's efforts to compete against lower-cost spots like Florida, Texas and North Carolina for increasingly mobile residents and workers. Healey took office in January promising to tackle the "barriers that are holding back our people and our state," like the "out of control" cost of housing.
Affordability in the Boston area
Brenda Van Der Merwe of Hammond Residential added that buying a home in Greater Boston is getting so expensive that people are only doing it when they have to:
“New marriages, new babies, new jobs, divorce, death, those types of purchases have become you know, you have to buy you have to sell.”
Industry experts say more people are broadening their search now that the median single family home is selling for $910,000, according to data from the Greater Boston Association of Realtors. CEO Greg Vasil said the interest rates around 7 percent are also making homeowners more reluctant to sell, exacerbating the property shortage.
“We're seeing those interest rates also be a barrier to entry for people. And the bottom line is we just don't have enough out there in the marketplace.”
When people do buy, Van Der Merwe said they’re asking for more from the seller, but they’re also willing to compromise. That’s true for Ben Rosenfeld and his fiancé, who went to her looking for a home near the Mass. Pike, but ended up buying in Waltham:
“We wanted all these bells and whistles like you know, you want an air conditioning and you want a 2000 square foot home or you want a garage or whatever. You really had to start cutting those things down.”
Industry experts say zoning bylaws are part of the problem and that communities need to be more open to development. But will the cost of housing ever go down?
“An interesting question. Not if we don't start to build more," Vasil said.
Boston Mayor Michelle Wu says the zoning laws are something she’s working to change, pointing to proposals pending on Beacon Hill.
