As the spring housing market draws closer, optimism is building that the dark days of the last six months may be passed.

Brokers’ and agents’ hopes are springing to life after a tough holiday season like the snowdrops popping up among the dead leaves across Massachusetts this month thanks to an unseasonably warm winter. 

The dire shortage of inventory remains in all markets, observer say, but a consensus has taken hold that it could be alleviated as sellers get acclimated to a “new normal” of higher interest rates. 

“I call it being rate-stuck. They’re stuck in an interest rate that’s so low they don’t want to give it up,” said Al Becker, president of Hanover-based brokerage Jack Conway & Co. “If they financed their $600,000 home at 3.25 [percent], their new home is going to be financed at 6 percent. They’re going to be paying almost double the rate.” 

How long it takes for inventory to rebound – numbers of new listings were down 26.7 percent year-over-year in December statewide, and down 10.9 percent for the whole year according to the Massachusetts Association of Realtors – is an open question, but observers agree the market is still has enough enthusiastic buyers to keep prices from falling while the state readjusts to mortgage rates closer to those of the mid-2000s. 

Inventory Slashed 

As the average rate on a 30-year fixed-rate loan jumped, according to Freddie Mac, from the low 5 percent range to top out at 7.08 percent between August and November 2022, numbers of homes hitting the market fell and fell on a year-over-year basis. 

Statewide, the percentage declines were in the mid-teens for single-family properties each month between August and November, and in the low 20s or upper teens for condominiums before topping out in the upper 20s for both property types in December as November’s interest rate peak cascaded through to sellers’ listing decisions.  

“People were fearful,” said Cape Cod Five loan originator Patti Lotane, speaking about the Barnstable County market. “People had been talking to their agents saying, ‘Maybe rates will be lower in the spring.’” 

Melvin Vieira, a Realtor with RE/MAX Destiny and the 2022 president of the Greater Boston Association of Realtors saw the same trend in the state’s largest metro, with sellers and buyers spooked by talk of recessions or interest rate jumps. 

The effect? 

“Sales just dropped. That’s the short of it,” Becker said. 

But one market stood out for its relative peace: the Pioneer Valley. Nearby Hartford, Connecticut was named to Realtor.com’s list of top markets likely to fare well in 2023. Kevin Sears, broker at Sears Real Estate and the National Association of Realtors’ 2023 first vice president, even said the last three months “felt like a normal holiday season” despite the agita agents elsewhere in the state were feeling. 

Total numbers of single-family sales were down by only 14 percent in Franklin County, 4.8 percent in Hampshire County and 12.7 percent in Hampden County in 2022, according to The Warren Group, publisher of Banker & Tradesman, compared to 23.2 percent on Cape Cod and between 15.5 percent and 19.4 percent in Greater Boston’s five counties.  

Likewise, the year-to-date median single-family sale price in all three Pioneer Valley counties was up between 8.1 percent and 9.8 percent in 2022. Greater Boston’s five counties only managed between 4.7 percent to 7.1 percent growth save Plymouth County, which saw a 9.2 percent jump. 

Buyer Interest Appears Strong 

2022’s interest rate jumps didn’t just push legions of sellers out – it also did a number on the buyer pool, observer say, piling pressure on finances stretched thin by home prices pushed skyward over the course of the pandemic. 

The statewide year-to-date single-family median sale price was up 37.5 percent year-over-year and closed out 2022 at $550,000, while the same figure for condos hit $488,810 – up 28.6 percent – according to The Warren Group. 

The lower levels of competition gave buyers space to get their bearings, Vieira said: “They’re being more cautious.” 

But, possibly due to the large number of Millennial and Generation Z Bay Staters in their prime homebuying years, the state’s different housing markets never lost enough steam to see prices go appreciably lower. The statewide average number of days a single-family home spent on the market only hit 40 in December, MAR reported, lower than any of the last 20 Decembers, bar 2021. 

“It seemed like over the past couple of months, it wasn’t like the frenzy – if there was a new listing to come on the market, there would be a number of people at an open house, it would sell at a good price, but there wouldn’t be a frenzy,” Lotane said.  

“When I talk to first-time homebuyer classes, I’m looking at their signup rates. They’re still having a lot of people sign up. That’s a good thing,” Vieira said. 

And as the spring housing market’s promise begins to lighten the eastern horizon, Jack Conway’s Becker said even seller’s agents aren’t feeling in such dire straits, anymore. 

“We’ve still got such a short list of homes for sale, but I’m not having agents come to me asking ‘What the heck am I going to do?’” he said. 

Buyers appear to be growing more comfortable with today’s higher interest rates, thanks in part to the sustained strength of the job market regardless of recent tech-sector layoffs, Becker said. 

Spring Market’s Challenges 

As they prepare for the spring housing market, agents face several different challenges.  

First, market conditions will require extra, sustained effort to find new buyer and seller leads. 

“It’s back to basics for agents and brokers out there. You’re going to have to farm your networks and pick up the phone and make calls,” Sears said. “During the pandemic you could wake up in the morning and have two deals done before noon.”  

James Sanna

The equity sellers have built up in their homes can come in handy to help motivate them to list if they don’t have a pressing life event forcing an immediate move, GBAR’s Vieira said. 

“Agents need to go to home sellers and say, ‘You have this much equity built up in your house. Yes, interest rates have changed, but you can buy down the [mortgage] rate’” to something much closer to your current loan, he said. “You have all this equity – use it.” 

Pricing will also be a challenge.  

“Just because your neighbor sold for X a year ago doesn’t mean you’re going to get it. Let’s be realistic,” said Sears, imitating an agent talking to their seller client. “We’ve already seen some price reductions – people wanted to reach for what their neighbor got.” 

Still, whether or not 2023 brings more opportunities for homebuyers, plenty will still be left out in the cold by median single-family sale prices that are still hovering at or near record highs and, barring a recession, show little sign of falling far. 

“Until we start to build, until we start to do zoning reform, until we start getting more men and women into the construction labor force, we won’t fix that,” Vieira said.