Agents and brokers say the build-up of inventory on the Massachusetts condo market is forcing sellers to confront their expectations of being in control in pricing negotiations. iStock illustration

As the Massachusetts condominium market continues to soften, residential real estate agents and brokers say correct pricing is becoming paramount as properties sit on the market for longer.

But falling mortgage interest rates have the potential to give sales a boost as the year closes out.

According to MLS PIN data, the average days a condo spent on the market in Massachusetts increased by 23.7 percent from May to September of this year. The average condo has been on the market for 73 days as of Sept. 17.

This increase in time on market comes as Greater Boston condos are also seeing price drops. In August the statewide median sale price dropped by 3.2 percent year-over-year to $600,000 according to The Warren Group, publisher of Banker & Tradesman.

“The general picture is an underwhelming sales volume,” Jonathan Miller, real estate commentator and president and CEO of national appraisal firm Miller Samuel, said. “The price points of condos are generally lower, even on the luxury side are lower than single families as a housing stock and the lower the price, the more dependent on mortgage rates.”

With the market softening, pricing a property properly is crucial for sellers who are looking to not have their condo sit on the market. Ryan Glass, a Back Bay-focused vice president at Gibson Sotheby’s International Realty, said that it can be easy to overprice a property.

“It’s extremely easy in the market right now to overprice your property,” he said. “Sellers are typically about six to 12 months behind what’s actually happening in the market. So often the mistake that sellers make is they do overprice. I’m a firm believer that if you price something right, it will sell very quickly.”

Uncertainty, Investor Pullback

Uncertainty caused by federal economic policy, Glass said, is helping undermine the condo market, despite a rising stock market that would ordinarily help higher-end buyers pay more for a new home by borrowing against their assets.

“Anyone in the luxury market typically has a very strong business background or is very invested in following the market in general,” he said. “So, whenever there is news that is essentially spooking people in the stock market, that trickles right into the luxury real estate market right away. People get nervous of overpaying. They get nervous that it’s not a great time to be buying and they almost immediately go on hold and say, ‘I’m going to wait and see what happens.’”

Another factor, Glass said: Investors, who typically look for condo units under $2 million to rent out, have been unable to make potential investment purchases pencil in recent years.

“The numbers essentially do not work for investors,” he said. “There’s been a lot of opportunity in the city under $1.5 million because of the fact that any investor who might have bought with a mortgage, the rental numbers aren’t going to cover the expense of the mortgage itself. So, unless they’re a cash investor – which there is less of these days – then you see that those properties are sitting on the market right now.

MLS PIN data shows that condos priced between $250,000 to $599,000 made up 39.9 percent of all active inventory statewide as of Sept. 17. Homes between $600,000 and $700,000 made up another 21.4 percent of the market.

Sellers Adjusting Expectations

Sellers are still getting used to not having all the pricing power in deals, said Ricardo Rodriguez, principal at Ricardo Rodriguez & Associates who primarily conducts business in Boston but has members of his Coldwell Banker-affiliated team throughout New England.

The falling statewide median condo sale price is a reflection of sellers making concessions, he said.

Data from listings portal Zillow shows 18 percent of Greater Boston condos had a price cut last month. In August 2024, that figure was 17.1 percent.

“I think us, as real estate professionals, also have understood that that even entertaining hopeful pricing is not necessarily part of a sound strategy for sellers. I think that that there are more realistic expectations as to where things should be priced,” Rodriguez said.

Sellers who have held on to condos since the beginning of the decade, when interest rates were extremely low, are still in the mindset of the market that used to exist and not the reality of the current Massachusetts condominium market, Miller said.

“Some sellers are still anchored to the market a few years ago, and that just doesn’t exist,” he said. “In the current market, there’s not much of a margin of error for buyers, because affordability is so tight and challenged. There’s only so far a buyer can go.”

When condos sit on the market, it can be costly for sellers.

“I always tell my sellers that when it comes to price drops, you want to do them quickly and you want to make sure that you’re recapturing all of those buyers who first saw your property within that first two to three weeks,” Glass said. “Otherwise they go and they buy something else and now the price drops that you do down the road, if you wait too long, aren’t nearly as effective as they would have been had you corrected your price when you got that negative feedback after immediately listing.”

Sam Lattof

Lower Rates Could Juice Sales

Due to condos’ typically lower prices relative to single-family homes, there is the potential that any more drops in mortgage interest rates will have a greater impact on the condo market, Miller said. Prices could even grow outside of the luxury market if rate cuts make moderately-priced condos more affordable, observers interviewed for this story said.

“I think that we are going to see certain price points see a strong buyer pool coming through,” he said. “I think that is really important, because it creates a consumer confidence that really is going to reverberate throughout the entire market and all of different price points.”

The Massachusetts housing market still has a lot of pent-up demand that could result in a surge of activity if rates decline below 6 percent, Miller said.

Economists at mortgage-buyer Fannie Mae last week forecasted that rates could hit that low by the end of 2026. But Federal Reserve Chair Jerome Powell separately cautioned that further cuts in the central bank’s benchmark interest rate this fall weren’t guaranteed, despite optimism in the bond markets that have the strongest direct influence on mortgage rates.

Still, Glass said he’s optimistic.

“The market, it has these slowdowns, but it’s always extremely short-lived,” Glass said. Usually what tends to happen is spring comes and things bounce back.”