Massachusetts’ residential brokers and agents shouldn’t let the huge dips in home sales reported last week convince them the sky is falling.
July’s single-family sales were down 17.4 percent over July 2021, according to The Warren Group, publisher of Banker & Tradesman. Condominium sales last month were even worse: 24.5 percent off the same month last year.
Buyers are clearly feeling the heat as affordability hits record lows. But do these dramatic-looking sales figures signal a collapse in demand? Not likely.
First, remember that most home sales that closed in July went under contract in May and June. The economic conditions of those two months had a significant influence on how many homes formally traded hands in July, and at what price.
And June saw a 72-basis-point spike in the average interest on a 30-year, fixed-rate mortgage over the course of three weeks – faster than any other jump in the last five years, even including March’s meteoric rise in rates. Combined with widespread concern about rampant inflation at the time, that may very well have caused a substantial chunk of otherwise-qualified buyers to put their plans on hold and not put in offers on homes they could still afford.
For additional evidence, we point to pending sales figures, as reported by the Massachusetts Association of Realtors. Pending single-family sales were only down 4.2 percent year-over-year statewide in July, MAR reported. Some collapse in demand, that is, although it’s worth noting pending sales of condos were down 15.8 percent, in line with a 20.6 percent decline in June for listings of these more-affordable and therefore likely more price-sensitive dwellings.
Redfin reported last week that only 12 percent of Boston-area home sales – condos and single-families combined – and 13.4 percent of Worcester-area home sales fell out of contract in July, a far cry from the more than 1 in 4 sales that fell through in places like Las Vegas and Jacksonville, Florida.
Instead, what we are seeing is the slow-motion erosion of demand. Data on multiple-offer situations from Redfin shows Boston and Worcester are, by one measure at least, the sixth-most and fifth-most competitive housing markets in the country – but with levels of competition somewhat lower than the same time pre-pandemic.
While buyers may curse them for goosing price appreciation with their supersized buying power, Massachusetts’ relatively high share of well-paid tech workers could well be keeping sellers’ pandemic-driven home values afloat.
Just don’t stop to contemplate why we, as a society, are all so anxious that the values of existing homes might fall, taking retirement plans with them.
Letters to the editor of 350 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.
