Gov. Baker is starting to implement the early stages of opening up the Massachusetts economy. But what does this mean for Boston real estate prices? I’ve been contemplating this for a while now, basically, because I have nothing else to do as I desperately wait for my office phone to ring.
It’s easy to think that Boston condo for sale prices will drop in the coming months. After all, buyer demand is down and economic times are hard. Eventually, that has to start sending prices downward, right?
Not exactly. Let me restate that, it will — but the definition of downward varies a bit. While some of my Boston real estate broker friends expect prices to actually decrease in the near future, others, like me, simply expect the overall appreciation rate of downtown Boston condo prices to slow.
Still, it’s downward movement nonetheless, and if you’re on the hunt for your next Boston high rise condo for sale, this could be a ripe opportunity to jump in, especially with historic low-interest rates.
Here’s a quick glimpse at what experts are saying about home prices in the coming months.
Fannie Mae
The Fannie Mae forecast released this week actually predicts that existing home prices will fall in the third quarter of the year, decreasing from a median price of $283,000 to $281,000. They’ll keep falling through Q1 2021, bottoming out at a median $265,000.
New home prices will also decline, according to the forecast, dipping from $328,000 to $322,000 next quarter. Unfortunately, it seems the window of opportunity will close rather quickly on new construction. According to the forecast, prices will level out at a median of $327,000 by Q4 2020 and stay there through Q1 2021.
Freddie Mac
Freddie Mac’s experts expect home prices to drop, too, falling 0.1% in the third and fourth quarters of this year, and then again in Q1 next year. In total, it predicts home prices will decrease by 0.5% over the next 12 months.
It’s good news for potential buyers and investors, but likely not the bargain-basement prices many were hoping for.
“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices,” Freddie Mac’s Economic and Housing Research Group reported. “Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices.”
I’m in the camp that thinks there is a chance prices might decline, however, a sharp cooldown is more likely. If prices do drop, it’s only in the most severe of scenarios, for example, another outbreak of the virus in the winter.
Boston condo for sale prices is what economists call downward sticky, which means that when faced with taking a loss on the sale of a home or taking it off the market, Boston condo sellers will tend to the latter.
I wouldn’t expect a windfall of bargain-priced foreclosures either — even once the pandemic has cleared.
Why?
The relief programs provided by the federal government in the form of mortgage forbearance, suspension, and deferral, combined with additional unemployment support and stimulus checks, will help keep financially distressed Boston condo owners in their homes instead of having to foreclose or have a short sell. This will lead to much fewer distressed properties than during the Great Recession, and as such, very little downward pressure on home prices will occur.
With all that said, everything I wrote goes out the window, if what I read yesterday is correct:
