Have Boston condo sellers missed the boat?
- The supply of homes for sale jumped 9% last week compared with the same week one year ago, according to Realtor.com.
- Real estate brokerage Redfin also reported that new listings rose nearly twice as fast in the four weeks ended May 15 as they did during the same period a year ago.
- Pending home sales, a measure of signed contracts on existing homes, dropped nearly 4% in April, month to month and were down just over 9% from April 2021, according to the National Association of Realtors.
Hot Boston condo market begins to cool off
Sharply higher mortgage rates have caused a sudden pullback in Boston condo sales, and now Boston condo sellers are rushing to get in before the red-hot market cools off dramatically.
The supply of homes for sale jumped 9% last week compared with the same period a year ago, according to Realtor.com. That is the biggest annual gain the company has recorded since it began tracking the metric in 2017.
Real estate brokerage Redfin also reported that new listings rose nearly twice as fast in the four weeks ended May 15 as they did during the same period a year ago.
Boston Condo Rising Rates
“Rising mortgage rates have caused the housing market to shift, and now home sellers are in a hurry to find a buyer before demand weakens further,” said Redfin Chief Economist Daryl Fairweather.
Boston condo sellers clearly see the market softening. Pending home sales, a measure of signed contracts on existing homes, dropped nearly 4% in April from March. They were down just over 9% from April 2021, according to the National Association of Realtors. This index measures signed contracts on existing homes, not closings, so it is perhaps the most timely indicator of how buyers are reacting to higher mortgage rates. It marks the sixth straight month of sales declines and the slowest pace in nearly a decade.
April sales of newly built homes, also measured by signed contracts, dropped a much wider-than-expected 16% compared with March, according to the U.S. Census.
Boston condo sales are slowing because mortgage rates have risen sharply since the start of the year, with the biggest gains in April and early May. The average rate on the 30-year fixed mortgage started the year close to 3% and is now well over 5%.
Boston Condo Prices
While home prices rose steadily during the first two years of the Covid pandemic, falling mortgage rates largely offset those increases.
By 2021, the monthly payment was only up about $100. This month, with prices rising another 21%, and mortgage rates surging to around 5.5%, the monthly payment hit $1,991 – almost $800 a month more than it was in 2019.
Boston Condos and the Bottom Line
While Boston condo sellers were in the driver’s seat barely six months ago, they are now seeing far less competition from Boston condo buyers. A demand index from Redfin, which measures requests for home tours and other homebuying services, was down 8% year over year during the week ended May 15. This was the largest decline since April 2020, when the pandemic paused most homebuying activity.
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