The pressure may be easing on Greater Boston’s housing market, but don’t mistake that for a return to normalcy.
Mortgage rates – which topped out at 5.3 percent last month before sinking slightly to 5.1 percent last week – combined with rising home prices have pushed the traditional 30-year loan out of reach for many.
Not a few real estate leaders have expressed hope that this trend could cool the absurd and unhealthy levels of buyer demand afflicting the region. And the most recent real estate data shows indications some cooling might have begun last month.
Online brokerage and listings site Redfin reports that the share of listings in the five-county Greater Boston region with price drops hit 3.9 percent at the end of May, up from 2.3 percent at the end of March. The number of actives listings is growing faster than it did last year, as well, helping make up the enormous deficit relative to 2021’s already-starved housing market. And the numbers of new listings hitting the market in May have even jumped.
But don’t treat any anecdotal reports of a less intense market as a sign the housing market is “fixed.”
First, the number of homes available for sale is still a little under half what it was at this time in 2019 – itself a not-entirely-healthy housing market. It will likely take years of lower buyer demand to build up enough inventory to tamp down on bidding wars.
The trouble is, these same years won’t move the state or the country out of the demographic bubble it’s in right now, as large numbers of Millennials hit prime homebuying age. This naturally elevated level of demand is being compounded by the high-earning jobs Boston’s tech, finance and biotech sectors have created in their thousands in recent years. With jobs paying in the six figures, many of these Millennials still have the financial firepower to weather even greater price jumps to live where they want.
Add to that problem: Lenders still have lots of tools at their disposal to get lower-earning buyers into expensive homes. As Diane McLaughlin reported in last week’s issue, mortgage lenders are breaking out tools like adjustable-rate loans left to gather dust in the last few years. These products’ interest rates stay low – an average of 4.04 percent according to the latest Freddie Mac survey – for several years, letting a buyer either refinance down the road or sell their starter home once they’ve built up some equity and pay raises.
Only aggressive housing production can save us, now. Imagine: If the homebuilders in the state’s teardown industry could be allowed and incentivized to build four modest units instead of the McMansions they are locked into selling by zoning, our housing market could be far healthier.
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