Boston Condos for Sale and Apartments for Rent
Good news for Boston condo buyers: It’s becoming a buyers market. What can real estate sellers do?
May marks turning point in housing frenzy, homebuyers starting to regain control
by Liz Hughes June 07, 2022
Homebuyers are finally starting to regain some control.
May was a turning point in the pandemic housing frenzy, according to a new Redfin report, which saw home inventory climb to a new high and more sellers dropping their prices.
But that all comes at a great cost as record-high prices, along with the 5% mortgage rates continues to keep many buyers out of the market. Last month a record 57% of homes sold above list price, up from 51% a year earlier.
Redfin’s economics research lead Chen Zhao said the sudden surge in mortgage rates led to May’s sudden and significant housing market cooldown.
“However, mortgage rates are now stabilizing and homes remain in short supply, so while we do expect home-price growth rates to decline, we don’t expect prices to fall much at the national level,” Zhao said. “For homebuyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up.”
Redfin found fewer Google searches for “homes for sale” during the week ended May 21, down 10% from a year earlier. Its Homebuyer Demand Index, which measures requests for tours and other services, fell 9% year over year during the week ended May 29, the seventh consecutive decline in the index.
Additionally, mortgage applications fell 14% from last year as the 30-year mortgage fell slightly to 5.09% for the week ended June 2. With that, the monthly mortgage payment on a median asking price home fell slightly to $2,391 up 40% from $1,710 a year earlier, when mortgage rates were 2.99%.
In the four weeks ended May 29, active listings fell 10% year over year (the smallest decline since April 2020). The median asking price rose 17% from 2021 to $412,450. Meanwhile, the median sale price increased 16% year over year to a record $400,999.
Fifty-four percent of homes went under contract with an accepted offer within the first two weeks of being listed, up from 53% last year. Thirty-nine percent of homes went under contract with an accepted offer within one week, remaining flat from last year.
Homes on the market fell to a record-low 15 days, a drop from 19 days in 2021. And they continue to sell well above asking price. A record 57% of homes sold above list price last month, up from 51% a year earlier.
Reports have emerged from real estate firms that some Boston condo sellers have been lowering their asking prices, in the first sign that buyers may finally be getting a break in the red-hot housing market.
That’s according to a report from realtor.com last week, cited by CNBC. It said new listings the previous week rose 8% from a year earlier, following four straight weeks of annual declines. While the total active inventory in the residential real estate market is still down 13% from a year ago, the rise in new listings of late suggests that things may have bottomed out. Traditionally, new listings tend to peak in May.
Boston condo prices still high
That said, Boston condo prices remain well above last year’s level. In addition, higher mortgage rates than a year ago mean houses become even more expensive for anyone who needs to finance a purchase. The average borrower is now paying 38% more on their monthly payment than they would have done for the same home one year ago.
Inflation rate and real estate
The rise in inflation and related mortgage rate hike means many Boston condo buyers have less flexibility in their budget to chase after newly listed homes. For those who still can persist, they may benefit from having less competition, which could in turn translate into relief from growing home prices.
Real estate Supply on the rise
With more supply of listings and mortgage rates rising fairly sharply, Boston condo sellers appear to be in the mood for compromise, at least a little bit. Around 12% of listed homes during the four weeks ending April 3 lowered their asking price, up from just 9% of sellers one year ago.
Boston condos price drops are still rare
“Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” Redfin Chief Economist Daryl Fairweather. “It goes to show that there’s a limit to sellers’ power. There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door.”
Mortgage News Daily reported that the interest rate really took off in the past few weeks, surpassing 5% last week. As a result, consumers are more pessimistic about the housing market than they have been for some time, according to a survey on the matter by Fannie Mae.
Mortgage rates to rise further for Boston condo buyers
Now, 69% of consumers expect mortgage rates to rise further, up from 67% in March. A growing number of consumers also believe home prices will continue to make steady gains.
“If consumer pessimism toward homebuying conditions continues, and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast,” wrote Mark Palim, vice president and deputy chief economist at Fannie Mae.
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It’s going to be a Boston real estate buyer’s market for the next 2-6 months, and the vast majority of Boston condo agents have never seen a buyers’ market in downtown Boston, let alone know how to navigate it. Over the last ten years, listing agents have gotten away with doing little or nothing to accommodate the Boston condo buyers – their mantra has been, “hey, if you don’t like it, then cancel and we’ll get someone else”. But will there be any other buyers today?
Buyers were signing Offers at a price close or above asking price to make the sellers happy, but that will be major challenge today. Yes, I thought I never would say this, but the downtown Boston real estate market is becoming a buyers’ market.
Here are my tips for sellers in a buyers’ market:
- Get a pre-listing inspection, and fix as many issues as possible before going on the market.
- Have specific quotes available for other issues that aren’t fixed yet.
- In spite of furnishing this data to the buyers, expect that they will want to re-negotiate.
- Build a defense in advance.
You may still need to do a little something for them to get the deal done, but at least being prepared will keep it to a minimum.
