| November was another month for the record books in Massachusetts’ real estate market, but questions are beginning to percolate: Will this pattern continue far into 2021?
Last month’s housing sales figures came out last week and according to The Warren Group, publisher of Banker & Tradesman, the median sale price for a single-family home was up nearly 18 percent on a year-over-year basis, while the number of sales last month was almost 25 percent higher than last November. It also marked the fifth consecutive month with a median home price above $450,000.
It’s true the median is being dragged upwards by increased transactions on the upper end of the price spectrum – the number of Nantucket sales year-to-date is up over 77 percent, for example, while the same figure in Dukes County is 47 percent – showing high-end buyers are still highly active long after the panic phase of the pandemic has passed.
But cabin fever, growing families and the promise of more working from home in the future are also pushing buyers lower down the income ladder to cash in on incredibly low interest rates. And those low rates are letting a wider array of buyers bid up home prices without much restriction by keeping their monthly payments low.
It’s possible the arrival of a COVID-19 vaccine will see a wave of new inventory hit the market as older, downsizing homeowners look to complete moves delayed by the pandemic, or otherwise try to not miss out on an unprecedented seller’s market. This would certainly help slow what seem to be increasingly unsustainable price increases even if demand stays high.
But two points bear consideration.
First, Massachusetts was only 61 single-family or condo sales away from hitting last year’s total of homes sold as of Nov. 30 and actually saw 1.55 percent more single-families sold than last year. This is not indicative of a group of homes missing from the market.
Second, with both parties likely to stay at loggerheads in Congress for some time to come – witness Republican legislators’ “blue state bailout” attacks on aid to financially struggling communities of all ideologies – low interest rates will be the Federal Reserve’s main weapon to aid economic recovery, and Chair Jerome Powell has signaled his intent to use that weapon aggressively.
The result? The same mortgage interest rates at the heart of this buying frenzy will, as a National Association of Realtors panel of economists predicted last week, likely stay in the range of 3 percent all year. It’s hardly a recipe to take some of the ardor out of buyers’ frenzy.
As with many things in Massachusetts real estate, the market’s problems come back to our shocking lack of inventory caused by decades of NIMBY-fueled underbuilding. Until that happens, housing affordability will only get more and more fragile.
Letters to the editor of 300 words or less may be submitted via email at editorial@thewarrengroup.com with the subject line “Letter to the Editor,” or mailed to the offices of The Warren Group. Submission is not a guarantee of publication.
