If you’ve ever dreamed of buying your Back Bay condominium, or selling your current home to upgrade, you’re no stranger to the rollercoaster of emotions changing home prices can stir up. It’s a tale of financial goals, doubts, and a dash of anxiety that many have been through.
But if you put off moving because you’re worried home prices might drop, make no mistake, they’re not going down. In fact, it’s just the opposite. National data from several sources says they’ve been going up consistently this year (see graph below):
Here’s what this graph shows. In the first half of 2022, home prices rose significantly (the green bars on the left side of the graphs above). Those increases were dramatic and unsustainable.
So, in the second half of the year, prices went through a correction and started dipping a bit (shown in red). But those slight declines were shallow and short-lived. Still, the media really focused on those drops in their headlines – and that created a lot of fear and uncertainty among consumers.
But here’s what hasn’t been covered fully. So far in 2023, prices are going up once more, but this time at a more normal pace (the green bars on the right side of the graphs above). And after price gains that were too high and then the corrections that followed in 2022, the fact that all three reports show more normal or typical price appreciation this year is good news for the housing market.
Orphe Divounguy, Senior Economist at Zillow, explains changing home prices over the past 12 months this way:
“The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023. . . . That downturn has proven to be short lived as housing has rebounded impressively so far in 2023. . .”
Looking ahead, home price appreciation typically starts to ease up this time of year. As that happens, there’s some risk the media will confuse slowing price growth (deceleration of appreciation) with home prices falling (depreciation). Don’t be fooled. Slower price growth is still growth.
Even though higher mortgage rates cause Boston condo buyer demand to moderate, they also cause the supply of available homes to go down. That’s because of the mortgage rate lock-in effect. When rates rise, some homeowners are reluctant to sell and lose their current low mortgage rate just to take on a higher one for their next home.
So, with higher mortgage rates impacting both buyers and sellers, the supply and demand equation of the housing market has been affected. But since there are still more people who want to purchase homes than there are homes available to buy, prices continue to rise. As Freddie Mac states:
“While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase . . .”
- Buyers: If you’ve been waiting to buy a Boston condo for sale because you were afraid its value might drop, knowing that home prices have gone back up should make you feel better. Buying a home gives you a chance to own something that usually becomes more valuable over time.
- Sellers: If you’ve been holding off on selling your house because you were worried about how changing home prices would impact its value, it could be a smart move to work with a real estate agent and put your house on the market. You don’t have to wait any longer because the most recent data indicates home prices have turned in your favor.
Boston condos for Sale and the Bottom Line
If you put off moving because you were worried that home prices might go down, data shows they’re increasing across the country. Let’s connect so you can understand how home prices are changing in our local area.
Real Estate Sellers Survey
The online survey, fielded in early May, had 1,600 U.S. adult respondents, of which 267 said they planned to sell their home within the next six months. The survey found that the tough market was not the biggest consideration for those who haven’t put their homes on the market sooner. Rather, among those who planned to sell, 60 percent said they’ve been waiting to list their homes because the timing hasn’t felt right.
The other 40 percent of respondents had market-related reasons for delaying: 20 percent cited concerns about low inventory, 8.6 percent were worried their home wouldn’t sell for what it’s worth, 7.5 percent said low mortgage rates made them feel like there’s not rush to sell and 5 percent cited low homebuyer demand in their local market.
“Local market conditions and other factors will ultimately influence the price of these listings, but this finding could indicate that inventory traditionally sought by first-time buyers could relax enough for eager buyers without deep pockets, or for current owners looking to downsize,” Audrey Somero, Homes.com’s marketing and communications coordinator, wrote in a blog post.
Just under half of respondents planning to sell, over 47 percent, said they intended to list a single-family detached home, followed by nearly 29.5 percent who planned to list an attached home such as a condo or townhouse, 13 percent who planned to list a multi-family property such as a duplex or quadplex, 6.2 percent who planned to list a luxury home and 4.1 percent who planned to list a vacation home.
According to Homes.com, 33 percent of respondents planned to use at least one strict parameter when selling, such as refusing to consider offers with contingencies or other “strings attached,” requiring all-cash payments, no contingencies and/or less than 30 days to close, or selling their homes “as is” — lower than the 41 percent of recent sellers Homes.com surveyed with such requirements.
“While most agents don’t recommend waiving inspection contingencies, this finding suggests that desperate buyers may have more choices of ‘move-in-ready’ homes in the near future,” Somero wrote.
“If we’ve learned anything from the past year’s real estate market, it’s that buyers need to be ready for anything. But if our survey respondents are any indication, buyers in the near future could see at least some relief in the homebuying process. Only time will tell what that might look like.”
A realtor.com report released last week also indicated that a buyer-friendly market may soon be in reach
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