Boston Condos for Sale and Apartment Rentals

Loading...

Is the Boston condo market softening?

It’s been a crazy year for Boston real estate market with bidding wars, record home prices, and historically low Boston condo inventory, but that may all come to an end in 2022, according to NAR Chief Economist Lawrence Yun.

Yun, who spoke at the National Association of Realtors 2021 Realtors Conference & Expo earlier this month, said market conditions are strong, and sales are the best they’ve been in 15 years. He went on to say this success will continue, but next year’s home sales will likely not top 2021’s. 

While real estate sales may decline, Yun says he expects home sales to continue to outpace pre-pandemic levels, as he anticipates an increase in housing inventory from new construction and the end of mortgage-forbearance programs. 

What he doesn’t know, he said, is how work-from-home opportunities will continue to fuel market changes. That’s something, he said, that those in the industry should keep an eye on.

“We are only in the first innings of work-from-home options,” Yun said in a press release. “People have not fully digested the work-from-home-flexibility model yet in determining home size and locational choice.”

Boston Condos for Sale and the Bottom Line

Yun also predicts mortgage rates to increase from the current 3% to 3.7% in the coming months. 

Boston Condos for Sale and Apartment Rentals

Loading...

Click Here to view: Google Ford Realty Inc Reviews

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Is the Boston condo market softening?

Is the Boston condo market softening? Some Boston condo brokers have confided in me that they see the marketing softening. Fewer people are showing up for Open Houses, more brokers are doing price reductions on Boston condos for sale.

On the flip side, one of my brokers did an Open House on Sunday and received an offer above the asking price. So for me, the verdict is still out;

 

___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

The Boston condo market has been anything but normal for the last eleven years. In a normal real estate market, home prices appreciate 3.7% annually. Below, however, are the price swings since 2007 according to the latest Home Price Expectation Survey:

After the bubble burst in June 2007, values depreciated 6.1% annually until February 2012. From March 2012 to today, the market has been recovering with values appreciating 6.2% annually.

These wild swings in values were caused by abnormal ratios between the available supply of inventory and buyer demand in the market. In a normal market, there would be a 6-month supply of housing inventory.

When the market hit its peak in 2007, homeowners and builders were trying to take advantage of a market that was fueled by an “irrational exuberance.”

Inventory levels grew to 7+ months. With that many homes available for sale, there weren’t enough buyers to satisfy the number of homeowners/builders trying to sell, so prices began to fall.

Then, foreclosures came to market. We eventually hit 11 months of inventory which caused prices to crash until early 2012. By that time, inventory levels had fallen to 6.2 months and the market began its recovery.

Over the last five years, inventory levels have remained well below the 6-month supply needed for prices to continue to level off. As a result, home prices have increased over that time at percentages well above the appreciation levels seen in a more normal market.

That was the past. What about the future?

We currently have about 4.5-months inventory. This means prices should continue to appreciate at above-normal levels which most experts believe will happen for the next year. However, two things have just occurred that are pointing to the fact that we may be returning to a more normal market.

1. Listing housing Supply is Increasing

Both existing and new Boston condo construction inventory is on the rise. The latest Existing Home Sales Report from the National Association of Realtors revealed that inventory has increased over the last two months after thirty-seven consecutive months of declining inventory. At the same time, building permits are also increasing which means more new construction is about to come to market.

2. Boston Condo Buyer Demand is Softening

Ivy Zelman, who is widely respected as an industry expert, reported in her latest ‘Z’ Report:

“While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets.

Indicative of this, our broker contacts rated buyer demand at 69 on a 0- 100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.”

With Boston condo supply increasing and demand waning, we may soon be back to a more normal real estate market. We will no longer be in a buyers’ market (like 2007-February 2012) or a sellers’ market (like March 2012- Today).

Boston condo prices won’t appreciate at the levels we’ve seen recently, nor will they depreciate. It will be a balanced market where prices remain steady, where buyers will be better able to afford a home, and where sellers will more easily be able to move up or move down to a home that better suits their current lifestyles.

Boston Condos and the Bottom Line

The Boston condo market returning to a normal is a good thing. However, after the zaniness of the last eleven years, it might feel strange. If you are going 85 miles per hour on a road with a 60 MPH speed limit and you see a police car ahead, you’re going to slow down quickly. But, after going 85 MPH, 60 MPH will feel like you’re crawling. It is the normal speed limit, yet, it will feel strange.

That’s what is about to happen in real estate. The Boston condos market is not falling apart. We are just returning to a more normal market which, in the long run, will be much healthier for you whether you are a buyer or a seller.

Boston Condos for Sale and Apartment Rentals

Loading...

Click Here to view: Google Ford Realty Inc Reviews