It’s early days, yet, but there are signs the spring 2023 housing market won’t be as dire as that of fall 2022.
First, price increases have significantly slowed. According to The Warren Group, publisher of Banker & Tradesman, the statewide median single-family sale price rose a mere 2 percent year-over-year in December, to $510,000. That’s the slowest such increase in quite a while.
Among condominiums, which dominate the most urban markets, the story was similar. Their median sale price was up only 1.4 percent in December, to $445,000.
The price slowdowns in both property types will help reduce upward pressure on list prices this spring. That, in turn, will help keep homes from floating even further out of reach of most first-time buyers and sellers looking to upgrade.
Second, mortgage rates are continuing to creep downward from their frightening highs of early November. According to Freddie Mac, the average interest rate on a 30-year, fixed-rate loan is now 6.15 percent – not fantastic, but nearly a full percentage point below where rates topped out in 2022, not coincidentally around when many of the homes in December’s sales report went under agreement, driving sales tallies down by record amounts.
Should this trend continue, it will create both a positive narrative agents can offer prospective sellers – the most important bottleneck in today’s market – and a meaningful reduction in their monthly mortgage payments as they look to trade up or down.
Third, inventory appears to be building up somewhat. The Massachusetts Association of Realtors reported last week that the number of single-family homes for sale statewide was down only 8.5 percent year-over-year in December despite a 26.7 percent drop in new listings on the same basis. This will take pressure off buyers who would otherwise feel the need to heedlessly bid up the price of homes.
Fourth, despite all this, demand remains quite strong. We are still in the middle of the same demographic bunch-up that’s generated the biggest number of Americans in their prime homebuying years since the Baby Boomers. A glance at market statistics provided by MAR reflects this: the time a property spends on the market is still quite low, and the market is far away from the traditional definition of a “balanced market” that has around four to six months’ worth of homes to sell. This should, market-watchers keep saying, prevent home prices from slipping significantly, which itself could cause the market to falter in other ways.
There’s no doubt about it that home prices are quite high – perhaps unsustainably so if interest rates don’t fall too much further – and this will keep a new house out of reach for many this spring. But if the key to getting this market unstuck is convincing more sellers that they can confidently list their homes without fear of being unable to find a new place to buy, this spring could be a good place to start.
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