Boston condo bubble or people bubble?
With all the headlines and buzz in the media, some people believe the Boston condo for sale market is in a housing bubble. As the Boston condo for sale market shifts, you may be wondering what’ll happen next. It’s only natural for concerns to creep in that it could be a repeat of what took place in 2008. The good news is, that there are concrete data to show why this is nothing like the last time.
The supply of Boston condo inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.
For historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to tumble. Today, supply is growing, but there’s still a shortage of inventory available.
The graph below uses data from the National Association of Realtors (NAR) to show how this time compares to the crash. Today, unsold inventory sits at just a 3.0-months’ supply at the current sales pace.
One of the reasons Boston condo for sale inventory is still low is because of sustained underbuilding. When you couple that with ongoing buyer demand as millennials age into their peak homebuying years, it continues to put upward pressure on home prices. That limited supply compared to buyer demand is why experts forecast home prices won’t fall this time.
During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. The graph below showcases data on the Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers Association (MBA). The higher the number, the easier it is to get a mortgage.
Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Back then, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices.
Today, things are different, and purchasers face much higher standards from mortgage companies. Mark Fleming, Chief Economist at First American, says:
“Credit standards tightened in recent months due to increasing economic uncertainty and monetary policy tightening.”
Stricter standards, like there are today, help prevent a risk of a rash of foreclosures like there was last time.
The most obvious difference is the number of homeowners that were facing foreclosure after the housing bubble burst. Foreclosure activity has been on the way down since the crash because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM Data Solutions to help tell the story:
Updated: Boston Real Estate Blog 2022
Click Here to view: Google Ford Realty Inc Reviews
SEARCH BOSTON CONDOS FOR SALE
- Boston Back Bay condos for sale and rent
- Beacon Hill Boston condos for sale and rent
- Charlestown Boston condos for sale and rent
- Charlestown Navy Yard sale and rent
- Dorchester Heights Boston condos for sale and rent
- Fenway Boston condos for sale and rent
- Jamaica Plain Boston condos for sale and rent
- Leather District Boston condos for sale and rent
- Midtown Downtown condos for sale and rent
- Seaport District condos for sale and rent
- South Boston condos for sale and rent
- South End Boston condos for sale and rent
- Waterfront condos for sale and rent
For more information please contact one of our on-call agents at 617-595-3712.