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July saw a decline in the number of single-family home sales compared to a normal pre-pandemic year, but it’s unclear if that’s a harbinger of fall market conditions.
Massachusetts saw a slight downturn in the number of single-family houses sold last month compared to July 2019, before the COVID-19 pandemic upended the typical market seasonality, leaving some observers to question whether the pool of potential homebuyers has shrunk, and others to conclude the let-up is only temporary.
The month saw 6,327 single-family home sales statewide, according to The Warren Group, publisher of Banker & Tradesman. That’s 1.5 percent fewer than were sold in July 2019.
July closed sales figures typically represent homes that went under contract roughly two months before.
Demand Still Strong
That’s not to say demand had slackened this spring. The median single-family sale price also spiked 17.4 percent on a year-over-year basis to $540,000, up from $460,000 in July 2020 and up 27.1 percent from July 2019 when the median sale price was $425,000. This marked a new all-time high for the median sale price for the month of July and the fourth consecutive month that the median single-family home price has hovered above $500,000, according to The Warren Group.
“When you look at percentage of original price received [among single-family listings], it’s still strong” indicating bidding wars continued at a near-record level, said Steve Medieros, a Keller Williams broker/associate in South Easton and the 2021 president of the Massachusetts Association of Realtors.
That figure, an average of all statewide listings, stood at 105 percent in July, up from 99 percent from one year before but down slightly from June, when it hit a multi-decade high of 105.9 percent according to MAR. And the average single-family listing spent a mere 23 total days on the market in July, an unheard-of number until the buying frenzy of recent months.
But Tim Warren, The Warren Group’s CEO, said in a statement the slide in sales numbers could be an indication of buyers getting priced out or fed up with ever-higher home prices.
“The chickens may have finally come home to roost for Massachusetts homebuyers,” Warren said. “Since the start of the third quarter of 2020, it was apparent that based on the flurry of sales, paired with the ever-shrinking inventory of single-family homes across the state, that there it was only a matter of time before we saw sales start to slide on a year-over-year basis.”
Condo Sales Draw Buyers
Another possible factor at play: Some buyers may have shifted their focus to typically-cheaper condominiums.
“There are a lot of people who, as the prices rose, if they were looking at a single-family, they shifted to condos and that’s why you saw the market strengthen,” Medieros said.
MAR’s own calculation of housing affordability shows the median single-family home in Massachusetts was between 11 and 19 percent less affordable during the spring market than it was last spring. For condos, that figure began the season nearly even with last March, but ended in a sudden 18 percent year-over-year drop in affordability in May as prices jumped and interest rates see-sawed.
Still, real estate data firm First American estimates that the average Massachusetts household was able to afford to pay 9.5 percent more on a house in May than it could in May 2020, thanks to persistently low mortgage interest rates.
There were 2,897 condominium sales in July up 17.6 percent over the same month in 2019. Meanwhile, the median sale price increased 9.3 percent on a year-over-year basis to $470,000 – a new high for the month of July and up 20.5 percent over July 2019.
“The condo market continues to be a bright spot in the Massachusetts housing market, but I’m curious if this level of activity can be sustained,” Warren said. “With the Delta variant now dominant and evidence of the effectiveness of vaccines wearing off, prospective condo buyers may once again turn cautious.”
New Listings Inch Up
Single-family buyers could be in store for a reprieve from the frenzied pace of price appreciation in recent years, as the number of homes for sale slid upwards slightly, to 5,518 statewide. That was in part thanks to 6,340 new single-family listings that came online in July, according to MAR. It’s a continuation of a trend that began last month, when for the first time in many years the number of new listings in June exceeded the number in May, typically when the largest number of listings hit.
“Typically, June and July are a bit of a slower time, but the inventory actually has picked up a bit, which is actually a good thing,” Medieros said. “Sellers are a little more confident in putting their homes on the market. They’ve seen enough inventory coming on that they think they can find something.”
Even as mortgage interest rates hover at or around record lows and mitigating the rise in home prices, Medieros said, there was “a little bit less of the frenzy.”
“There’s still activity, they’re still seeing multiple offers, but where you might see 20 [5 months ago] you’re seeing eight” he said.
In Greater Boston, a segment of buyers pulled back from the market after Memorial Day, whether due to summer vacations or market conditions that have caused many prospective buyers to lose out on home after home.
James Sanna
“With fewer buyers in the market over the past six to eight weeks, the volume and frequency of multiple offers is down as is the number of bidding wars, and that’s helped relieve some of the upward pressure on prices,” Greater Boston Association of Realtors President Dino Confalone said in a statement. “It remains a seller’s market, but we are starting to see more price adjustments and some inventory is starting to sit on the market a bit longer, especially if it’s not priced properly.”
The effect July’s sales will have on potential sellers’ psychology remains to be seen, Medieros said, with some agents reporting that their buyers and sellers were raising concerns about a possible housing bubble – a possibility he was quick to dispel, pointing to the still-tight market conditions.
Demand is expected to return in force this fall, Confalone and Medieros both said, with the same demographic factors, like a glut of Millennials entering prime homebuying years, that helped power the homebuying frenzy of the last 18 months still solidly in place. And despite dissention in its upper ranks, the Federal Reserve appears content to keep interest rates at current levels at least until partway through the fall.
