Nationwide home sale prices are slowing, while in Massachusetts, prices continue to set records. iStock illustration
Just call it a tale of two real estate markets.
Nationally, home prices have begun to level off and even decline in some markets – but here in Massachusetts, we continue to set new records, both statewide and in the perpetually overheated Greater Boston market.
And while real estate may be headed into a slowdown or even a downturn nationally, it’s unlikely home values here will follow suit, given both past history and some unusual local dynamics.
Overall, U.S. home prices rose a modest 2.1 percent in May, following 16 months of deceleration, according to First American Data & Analytics.
Annually, home prices are rising at their slowest rate since March 2012, when the real estate market was just beginning to show signs of life after being gutted in the Great Recession, First American reports.
Intercontinental Exchange put the number even lower, with U.S. home prices having risen just 1.4 percent on an annual basis, as of May, per The Wall Street Journal.
Double the National Rate
Yet locally, despite hints here and there of a potential deceleration, home prices continue to shatter records and make buying a home, already unaffordable for many middle class families, even more so.
Statewide, the median sale price of a single-family home price rose more than 5 percent in May on a year-to-date basis, hitting $620,000, according to The Warren Group, publisher of Banker & Tradesman.
That’s certainly a downshift from the 9 percent-plus increase we saw this time last year, but still more than double the national rate.
Both are a far cry from what we saw two years ago, when, amid the shock of the Fed’s inflation-busting campaign of interest rate hikes, prices statewide rose by just 1.9 percent, Warren Group numbers show.
Greater Boston home prices rose at a slightly faster, 5.5 percent year-to-date in May, hitting $785,000, The Warren Group reports.
It’s much the same story with the number of home sales.
Nationally, home sales fell 2 percent in April, the latest date available, per the National Association of Realtors.
Locally, sales of single-family homes rose 2.5 percent statewide on a year-to-date basis, and 2.4 percent in the Boston area, The Warren Group reports.
Dearth of New Housing
It may seem strange to see our local real estate market moving up, even as sales and prices level off and even sink in some cities, especially in the Sunbelt.
However, it’s a divergence that first began nearly two decades ago, fueled by one of biggest challenges now facing the Bay State and Greater Boston: The long-term and chronic decline in the construction of new homes.
Massachusetts has been underbuilding since the 1980s. The number of new single-family homes, apartments and condos each year has fallen by more than half.
The result has been soaring prices that have been insulated, to a great deal, from larger national trends.
We first began to see the divergence during the Great Recession, when home prices fell 33 percent nationally.
By contrast, the median single-family home price in the Boston area fell 15 percent from its peak in 2005 to its nadir in 2011, according to the Greater Boston Housing Report Card.
Single-family and multifamily construction collapsed in the immediate years after the Great Recession, taking nearly a decade to recover, both nationally and locally.
The Sunbelt saw a surge in new single-family construction in the wake of the pandemic. Not coincidentally, the region’s home sale prices are starting to moderate and decline in some areas.
We could certainly use that here in Massachusetts. Eastern Massachusetts communities with median home sale prices of more than $1 million now number in the dozens.
Yet in Massachusetts, the rebound in housing construction topped out around 2020 at levels that were still half of what they needed to be to match the state’s 1980s output, when the state was about average in the amount of new housing produced.
Scott Van Voorhis
The Fed’s anti-inflation campaign of interest rate hikes has sent those already anemic numbers plunging again.
And as housing starts go, so go prices, which, barring a national recession, won’t be headed down anytime soon in Greater Boston.
Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
