Clearly, demand for homes isn’t letting up in Massachusetts, regardless of the price.
The most recent report from The Warren Group, publisher of Banker & Tradesman, revealed that October’s tally of single-family home sales essentially matched October 2019’s – 5,285 to 5,235 – the last time we had anything like a normal fall housing market. These homes sold despite prices that have shot straight past the stratosphere over the last two years. The median single-family sale price in October was $500,000, up 28.5 percent from October 2019.
And condominium sales are following a similar pattern. October saw 2,089 sold, compared to 2,119 in October 2019, at a median price of $425,000 that rose 14.9 percent over the same time period.
This, in short, is the impact of record low interest rates. Even with single-family inventory still deep in the canyon into which it fell last year – down 62 percent between October 2019 and last month, precisely, according to the Massachusetts Association of Realtors – more Bay Staters are still finding more homes for sale and are snapping them up. In fact, homes sold faster than in any other October since MAR began reporting the data in 2004.
How long this will go on is anyone’s guess. The Federal Reserve is giving a new meaning to the phrase “deliberate approach” as it slowly closes the economic-stimulus tap, leaving prominent housing economists to wager that mortgage interest rates will only rise to the mid-3 percent range next year, and not until after the spring market is over. With President Joe Biden’s decision to nominate Fed Chair Jerome Powell for another term, it seems likely the central bank will continue to support homebuyers for years to come as they try to outbid each other with the desperation of starving lions.
The famed Wellesley College housing economist Chip Case’s observation that home prices are typically “sticky” on the way down should give comfort to buyers who’ve just signed mortgages on homes worth far less just two years ago. It remains to be seen, however, if that adage is still true when prices are so high that even small increases in mortgage rates start adding up. Redfin Chief Economist Daryl Fairweather recently calculated that the median American home – priced at $378,700 in her analysis – would cost $100 more per month if the average 30-year mortgage interest rate rises to 3.6 percent from the roughly 3 percent perch it currently occupies.
Massachusetts is more blessed than most other metro areas in having plenty of high-earners, and Greater Boston’s dynamic life sciences sector is minting more by the day. But are there enough to support further home price increases as more and more Millennials age into their prime home-buying years? Enough to sustain current prices when inevitably higher interest rates arrive?
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