The year is nearly over, most of the data is in and the results are clear: 2016 was a very good year for Massachusetts’ residential real estate market, improving on 2015, which was also strong.
According to data from The Warren Group, publisher of Banker and Tradesman, 2016 sales of single-family homes in Massachusetts through the beginning of December were up slightly over 2015 year-end totals. The median sale price of a single-family home was also up 1.7 percent from 2015 to $346,000, but still shy of $355,000, the peak sale price set in 2005.
By the beginning of December, the number of single-family home sales in Massachusetts this year had exceeded the total number of sales in 2015 as well.
The Greater Boston market has been unusually strong this year, but markets further from the Boston job market are doing well, too.
Earlier this year, Banker & Tradesman reported on communities in the north end of the Blackstone Valley (Boylston, Clinton, Hopedale, Mendon, Milford, Millbury and Worcester), where median 2015 single-family home prices were still 20 percent or more below their pre-crash highs. According to the most recent data available, those communities have fared better than most. In fact, all but one of those communities – Milford – saw double-digit increases in their median sale price this year.
And the benefits of Boston’s market go far beyond the 95 or even 495 belt, said Dan Breault, executive vice president and regional director of RE/Max Integra New England. Real estate in neighboring Connecticut and Rhode Island also benefit from Greater Boston’s churning jobs and real estate market.
“When I look at the Massachusetts market,” Breault said, “it’s a story about the Boston economy with technology, finance, health care and education cranking along like there’s no tomorrow. That drives the story. As you go out from Boston, the market remains strong because of that really strong economy, low interest rates, and low unemployment. The further out you get, the effects are less noticeable.”
Many buyers priced out of the Greater Boston market are heading west to towns like Leominster, according to Gerry Bourgeois, a 26-year veteran of real estate sales with Coldwell Banker in that town. Bourgeois said a commuter rail stop and easy access to Route 2 and I190 make North Central Massachusetts attractive to buyers and that has led to an increase in median sale prices in the area.
“Out this way, prices are improving, but they’re still not where they were in 2005 or 2006,” Bourgeois said. “Rising mortgage rates won’t help. It’s hard to come off a low-interest rate environment. A 1 percent change in a 30-year fixed-rate mortgage will raise a buyer’s monthly payment roughly 10 percent, but it’s not the end of the world. On the other hand, a 4.5 percent rate is better than a 6.5 percent.”
Freddie Mac’s Multi-Indicator Market Index (MiMi) backs that up. It combines four economic indicators with other proprietary data to create a composite index value for individual real estate markets. The MiMi says both Massachusetts and the Boston markets are “in range and improving” thanks largely to near full-employment this year. Massachusetts ranked 11th in the country, according to the index. As one would expect, the Boston market is a little stronger than the state as a whole.
There’s even good news for markets outside the Greater Boston area, which expected to benefit from the influx of Millennials who are supposed to enter the homebuying market next year.
The Millennials have already arrived in New Bedford, said David Pelletier of Pelletier Realty, a 37-year veteran of the New Bedford real estate market. Millennials are recognizing that they can own a home with a monthly mortgage payment roughly equivalent to what they pay in rent in Southeastern Massachusetts, and they’re diving into the market.
“Millennials are buying and the Baby Boomers are looking to downsize, so we’re seeing that progression,” Pelletier said. “The challenge is the limited inventory. It’s a catch-22. Boomers who are looking to downsize hesitate because they want to find something before they sell.”
Predications For 2017
Jonathan Smoke, chief economist for Realtor.com, predicts 2017 will be just as strong in the Bay State. He told a packed house at the Federal Reserve in Boston last month they were working in one of the strongest markets in the eastern half of the country.
The election of a pro-business president immediately sent financial markets off. As of the writing of this article, the Standard & Poor’s 500, the NASDAQ and the Dow Jones Industrial were all at or near record highs.
Nearly 20 percent of the homes in New England sell for more than $900,000, Breault said, and his company sells about 5 percent of those luxury homes. Even though prices are at record highs in many Greater Boston communities, Breault thinks there’s room for growth.
“From speaking with my brokers and agents, I might have thought we were close to the top for the last couple of years,” Breault said. “We’re in the midst of a really nice five-year stretch. In the last 100 days or so, I’ve been hearing brokers and agents getting some pushback on pricing from buyers, yet the sales seem to grow. Most brokers think pricing will go up a little bit in 2017.”
Pelletier said he’s seeing strong December sales activity, which historically carries over into the New Year. He expects 2017 to be at least as good as 2016 as long as consumer confidence remains as high as it currently is.
“Consumer confidence is good, but we’re in challenging times and you don’t know what event –either here or abroad – could trigger a change in the marketplace,” Pelletier said. “Still, it looks like next year will be as good as this year has been.”
Bourgeois said he is seeing the same thing. He also said the North Central Massachusetts market isn’t just getting busier – it’s getting healthier.
“One thing that’s been happening is the middle of the market has finally opened up again,” Bourgeois said. “The three-bedroom, two-and-a-half bathroom Colonial with a two-car garage segment of the market went stagnant for several years, but they’re coming back. Things are a lot healthier. Next year will be a healthy market.”
