Boston Condos for Sale and Apartments for Rent

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Mortgage rates may continue to rise as the Federal Reserve looks to tackle inflation.

My thoughts

By what the Federal Reserve is doing to combat inflation, I can’t see how this will not have some repercussions on our local downtown Boston condo market

What currently is the Boston condo mortgage rate?

The average rate on a 30-year fixed mortgage hit 5.89 percent this week, according to a Freddie Mac survey reported by the Wall Street Journal.

How do today’s mortgage rate compare to this time last year?

Boston condo mortgage rates are roughly double from what they were a year ago and exceeded a recent pandemic high set in June.

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Boston condo rising rates

How is the housing market reacting?

The housing market in recent years has been a tale of topsy-turvy borrowing costs. Mortgage rates hit historic lows during the pandemic, triggering a burst of activity for loan providers and firing up the housing market.

Then came an abrupt slowdown when the Fed started hiking interest rates earlier this year. Mortgage rates started to rise to levels not seen in years. The housing market rapidly began to cool and mortgage companies were forced to lay off employees left and right.

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Boston condo for sale market

How are rising mortgage rates impacting the national housing market?

Rising rates put a significant dent into demand. Even for the Boston condo for sale market, mortgage applications dropped to turn-of-the-century levels as rates continued to rise, even if they were not high by historical standards. Still, it sidelined prospective buyers and virtually shut down refinancing.

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Boston condo mortgage rates

What are the Federal Reserve future plans?

More bad news could be on the way for prospective Boston condo buyers seeking a mortgage. The Fed appears poised to once again lift rates by the end of the month, perhaps by as much as 0.75 percentage points, sending Boston condo buyers borrowing costs up and possibly spurring another spike in mortgage rates.

There may be a lag, however, should the Fed follow through on another rate hike. After the Fed in July raised rates a historic 75 basis points, mortgage rates briefly retreated. The slight upset to conventional wisdom could be chalked up to other factors, including inflation, unemployment and jobless claims, in addition to individual factors like credit scores and down payments. Mortgage rates tend to take their cue from the rate on 10-year Treasury notes.

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Boston condos for sale

Updated: Boston Real Estate Blog 2022

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Boston condo mortgage rates have doubled in one year

Purchasing a Boston condo for sale is getting harder, with mortgage rates on the rise again as the summer comes to a close. The average 30-year Boston condo mortgage is now 5.55%, according to data from Freddie Mac. Mortgage rates are now almost double what they were one year ago, and the latest data highlights the impact the increases are having on the cost of borrowing and there will be more interest rate hikes still to come for 2022.

A year-ago 30-year interest rates were 2.87%. Freddie Mac clocked the average 30-year, fixed-rate mortgage at 5.55%, up from 5.13% one week earlier.

Boston Condo Recession is at Hand

National Association of Realtors Chief Economist Lawrence Yun proclaimed that the U.S. is now experiencing a “housing recession”, with existing home sales falling 20% from a year ago. At the same time, new contract signings have also fallen by 20%, suggesting that things will only get worse as the year progresses. Moreover, there’s been a significant downturn in new home sales, which fell by 30% annually in July.

Home buyers are hampered by strong home price growth

In a blog post, NAR Senior Economist and Director of Forecasting Nadia Evangelou said buyers are being further hampered by strong home price growth, which are still up by double-digits compared to a year earlier. She wrote that a median-priced home now costs around $40,000 more than it did one year ago. However, while increased prices drive costs up, the rising rates do so even more. An increase of just one percentage point in mortgage rates has the same effect on mortgage payments as if home prices rose by 13 percentage points, Evangelou said.

The NAR said this week homes haven’t been this unaffordable since 1989. Increasing rates have made borrowing more expensive. In July, the typical monthly mortgage payment was almost $2,000 per month, up 54% from a year ago.

My Boston condo thoughts

I think as long as the Fed combats inflation with higher interest rates we will see a slowdown in the Boston condo for sale market, especially in the winter months as the Fed Chairman sees rate increases through the end of 2022.

Boston condo price reductions will be an arduous process as Boston condo sellers are sitting on a lot of equity and are not pressured to sell.

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Boston condos for sale

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