As mortgage rates increase will Boston condo prices fall?
Home prices eased across Greater Boston last month as the spring market got off to a cooler start than usual, according to the Greater Boston Association of REALTORS® (GBAR) April housing market report.
That cooler-than-normal start was the result of limited housing supply and the rising mortgage rates from prior months that had some putting their home buying search on hold and causing sellers to stay put.
In April, single-family home sales fell 25.9% year over year, with 667 homes sold, compared to 900 homes sold in April 2022. While sales had a month-over-month increase of 5.9% from March, it was the slowest April for single-family home sales since 2009.
Condominium sales performed similarly last month, with a 33% decline from a year earlier, with 697 condos sold compared to 1,041 in April 2022, marking the month’s lowest sales since 2015.
“The market has been rather uneven so far this spring, with buyer activity rising and falling from week to week based on the timing of new listings coming to market, fluctuations in mortgage rates and even the weather,” said GBAR president Alison Socha, an agent with Leading Edge Real Estate in Melrose. “The biggest challenges remain the lack of inventory and the reluctance of homeowners to sell and give up their low-interest mortgage. However, after the frenzy of the last few springs, today’s slower sales pace provides the feel of a more normal market, and that’s enabled buyers the time to proceed more cautiously while causing sellers to consider certain concessions during this period.”
Listings are at a premium, and it’s definitely affecting the market.
Selling prices have eased over the past year, the report found, as a result of a more “relaxed sales pace and higher mortgage rates limiting how much house buyers can afford.”
Socha says with listings at a premium, GBAR is seeing healthy competition at all price points, but with both the buyer pool and purchasing power decreasing from last year, there is upward pressure on prices.
“Buyers still outnumber listings in many communities so multiple offers remain quite common, but bidding wars are much more rare,” she said. “Sellers also have become increasingly more conservative on price when listing their home for sale. As a result, we’re not seeing a rapid run-up in prices at the moment, though they remain not far from their peak.”
The median selling price of a single-family home fell 3% from a year earlier, falling to $820,000 from $845,000. It also slid 0.6% from a month earlier, when the median home sale price was $825,000, and was down from its June 2022 peak of $899,950.
The median selling price for condominiums also fell last month, dropping 0.7% from $715,000 a year earlier, but rose 4.4% from $680,000 in March. Despite the increase, the median sales price is still 1% below April 2002’s record high of $717,000.
GBAR cites limited home and condo supply for keeping home prices high.
There was only a two to two-and-a-half-month supply of homes for sale entering May, which mirrors inventory from a year ago but is still not enough to satisfy demand.
Active listings of single-family homes in April fell 4.4% from 1,333 last year to 1,275 last month. Condo listings were also down, falling 1.7% from 1,786 last April to 1,755 last month. Single-family home listings are down 4.4% from last year and condo sales are down 1.7%.
“For those thinking about selling, market conditions are favorable for doing so this spring,” Socha asserted. “Many buyers who left the market last fall when mortgage rates hit 7% have returned and, with inventory still in short supply and equity values close to their record level of last spring, it’s an opportune time to be listing a home for sale.”
The report also found that since the end of last year, time on market continues to steadily decrease with single-family homes listed for a median of 15 days in April, compared to 34 in December, and condominiums staying on for 17 days, compared to 41 days in December.
The sold-to-list price ratio also improved in April for the second month in a row, according to the report, which found the typical single-family home sold for 103.2% of its asking price, up from 100.3% in March. Condominiums fared similarly, selling for 99.9% of the original asking price last month, compared to 98.9% in March.
As Boston condo interest rates rise, one would think logically that prices would decline, however, I haven’t seen that happen yet, at least not with the Beacon Hill condo for sale market,
Updated: Boston Real Estate Blog 2023
Click Here to view: Google Ford Realty Inc Reviews
Mortgage interest rates have increased by more than half of a point since the beginning of the year. They are projected to increase by an additional half of a point by year’s end. Because of this increase in rates, some are guessing that Boston condo prices will depreciate.
However, some prominent experts in the housing industry doubt that home values will be negatively impacted by the rise in rates.
Mark Fleming, First American’s Chief Economist:
“Understanding the resiliency of the housing market in a rising mortgage rate environment puts the likely rise in mortgage rates into perspective – they are unlikely to materially impact the housing market…
The driving force behind the increase are healthy economic conditions…The healthy economy encourages more homeownership demand and spurs household income growth, which increases consumer house-buying power. Mortgage rates are on the rise because of a stronger economy and our housing market is well positioned to adapt.”
Terry Loebs, Founder of Pulsenomics:
“Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices. These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers.”
Laurie Goodman, Codirector of the Housing Finance Policy Center at the Urban Institute:
“Higher interest rates are generally positive for home prices, despite decreasing affordability…There were only three periods of prolonged higher rates in 1994, 2000, and the ‘taper tantrum’ in 2013. In each period, home price appreciation was robust.”
Industry reports are also calling for substantial home price appreciation this year. Here are three examples:
- The Home Price Expectation Survey says that prices will appreciate by 5.8% this year.
- The Freddie Mac Outlook Report is looking for home prices to appreciate by around 7% in 2018.
- The CoreLogic HPI Forecast indicates that home prices will increase by 5.2% on a year-over-year basis.
As Freddie Mac reported earlier this year in their Insights Report, “Nowhere to go but up? How increasing mortgage rates could affect housing,”
“As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”
Boston Midtown condos for sale
Sorry we are experiencing system issues. Please try again.