Why has the housing market cooled? Many say it’s because prices are too high, compared to household incomes. Many others say it’s because mortgage loan interest rates have increased, making monthly payments unmanageable for more and more people.

So, what needs to happen, to bring buyers back to the table?

Well, smarter people than I have done their own analysis of the data.

According to these experts, each region of the country is different, because incomes and home prices vary, so widely.

For us, in the Northeast, they say:

If mortgage rates remain stable, prices would have to decline 10%, to achieve parity between housing prices and income.

If mortgage rates continue to drop, by as much as they have since Memorial Day, prices would need to decline 5%, to achieve parity between housing prices and income.

What do you think? Is a 10% decline enough to get buyers back to open houses?

I think it’s not that simple, that in addition to a drop in prices, enough time has to pass so that people stop fearing that things will continuously get worse.

I read somewhere this week that people will want to wait through at least three or four more Fed meetings with no interest rate hikes, before they believe the situation has stabilized.

Probably so.

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Updated: January 2018

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