The Downtown Boston condo market moving forward into 2022
What Boston for sale condo agents are telling me, it does feel like the movie “Groundhog Day” in which the main character, Bill Murray, finds himself reliving the same day over and over. The Boston condo for sale industry seems like it’s reliving past days; the last couple years have been lucrative for Boston condominium sellers and this ride is going to carry well into 2022.
National home sales reached the highest level in 15 years, with an estimated 6 million homes sold in 2021. Homeowners saw average home prices skyrocket nearly 20% which was the largest annual home price increase in the history of the House Price Index. In many hot markets especially in the southeast, the price increase was more than double that.
However, for downtown Boston condo buyers, it was a different story. For example, even through mortgage rates remained at record lows, it was difficult to even find an affordable Boson condo for sale to buy. Inventory of available homes reached an all-time low early in the year and competition was extremely stiff especially for first time buyers who were competing with investors and institutional buyers.
The overriding news was that inflation shot up at the fastest pace since 1982. Most experts say housing demand will stay strong in 2022 unless inflation continues to outpace wages at the same pace of 2021, which could cool buyer activity.
Everyone’s making their predictions, so I’ll jump in with mine as well:
- 2022 will continue to be a growth year although there will be some cooling, mostly due to inventory shortages
- Prices will increase but with fewer bidding wars for Boston condos for sale
- Average mortgage interest rates will rise above 4% in 2022
- The buyer-to-seller ratio imbalance will continue throughout the year
- New Boston high rise condo construction will continue but at a slower pace due to the rising cost and lack of building materials as well as labor shortages
- Affordability looms as a major challenge for many as inflation, prices, and increasing interest rates will impact many Boston condo for sale buyers
- The pandemic is the ongoing unknown. The fast-moving omicron variant is becoming the economy’s wild card
- It will be interesting to see the effect of stock market fluctuations and the mid-term elections
What will remain the same is how Boston condo brokers react to the changing market. Some will stay the course; others will look for opportunities to be more competitive and scale their growth. A certain percentage will be ready for personal changes and a path that enables brokers to take their chips off the table by selling or merging in today’s hot M&A market so that they may focus on other aspects of the business or just slow down.
While there are a number of paths for brokers wanting to explore financial and lifestyle options, each broker’s needs are different. It takes expertise to find the solution that makes the most sense for a broker/owner’s long-term gain.
It reminds me of the great quote from American motivational writer, William Arthur Ward, who said: “…the pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”
Updated: Boston Real Estate Blog 2022
The downtown Boston condos market survived the 2020 health crisis and is now positioned for a strong year in 2021. Record-low mortgage interest rates are a driving factor in this continued momentum, with average rates hovering at historic all-time lows.
According to the latest Realtors Confidence Index Survey from the National Association of Realtors (NAR), buyer demand across the country is incredibly strong. That’s not the case, however, on the supply side. Seller traffic is simply not keeping up. Here’s a breakdown by state:As the maps show, buyer traffic is high, but seller traffic is low. With so few homes for sale right now, record-low inventory is creating a mismatch between supply and demand.
NAR also just reported that the actual number of homes currently for sale stands at 1.28 million, down 22% from one year ago (1.64 million). Additionally, inventory is at an all-time low with 2.3 months supply available at the current sales pace. In a normal market, that number would be 6.0 months of inventory – significantly higher than it is today.
Buyers need to remain patient in the search process. At the same time, they must be ready to act immediately once they find the right home since bidding wars are more common when so few houses are available for sale.
Sellers may not want to wait until spring to put their houses on the market, though. With such high buyer demand and such a low supply, now is the perfect time to sell a house on optimal terms.
The Boston real estate market is entering the year like a lion. There’s no indication it will lose that roar, assuming inventory continues to come to market.