Boston Real Estate Market Insights | Holiday Edition

It’s hard not to sound like a broken record these days when discussing the status of the real estate market.  Low inventory, high demand, high prices, rising interest rates and now inflation!  Buyers and renters alike are hoping for any good news this holiday season and I’m here to spread some holiday cheer by offering a positive spin on the outlook of the market.  

First the broken record; After a slight dip in September activity, pending home sales increased by 7% in October versus the previous month. Median sale prices continue to surpass last year’s figures by double digits.  And yes, demand is still far outpacing supply and bidding wars remain the norm. Most buyers are finding that unlike in baseball, if you’re batting .200, you’re not doing too bad.  In other words, if it took you 5 offers before you finally won the prize, welcome to the whacky covid real estate market – THIS article on sums it nicely.

Fear not, there are signs that we may start to see inventory increase this winter, and dare I say it – a slight softening in the market?!?!  This winter is shaping up to be one for the record books as sellers look to cash in on (inflated) bidding war values and buyers hope to knock one out of the park before interest rates increase significantly.  Does this mean that prices are going to stop increasing at breakneck speeds and sub-asking price offers will become the norm – probably not.  However, we could start to see buyer batting averages increase to .300 or .400 which would be a welcome change.  Speaking of interest rates, most industry experts agree that while interest rates will continue to rise, they aren’t likely to get anywhere near 4% until the 4th quarter of 2022 or sometime in early 2023.  

During the holiday season in a typical year, agents are usually advising their clients to hunker down for the winter and put off selling (or buying) their home until the market picks up in the Spring – but this is no typical year (DUH)! Lawrence Yun, chief economist at the National Association of Realtors has been quoted as saying, “This winter, there will be more sales compared to pre-pandemic winters going back all the way to 2006.” Mr. Yun further commented, “Inflationary pressures, such as fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

According to a recent survey of 1,300 homeowners conducted by completed in October, 26% of respondents said they were planning on selling their home in the next 12 months and of the 26%, almost 70% said they planned on listing in the next 6 months.  That is more than double the percentage of homeowners who responded to the same survey which was conducted in the spring.  All of the indicators in the survey point towards a busy winter and spring season, the details of which can be found HERE

George Ratiu, Manager of Economic Research for commented on the recent survey stating, “The pandemic has delayed plans for many Americans, and homeowners looking to move on to the next stage of life are no exception. Recent survey data suggests the majority of prospective sellers are actively preparing to enter the market this winter.”

Other indicators that this year is like none other can be found throughout the industry.  ShowingTime, a company that tracks scheduled property showings has reported that 2021 fall showing requests have been increased 60% over the 3 years preceding the pandemic.  As if anyone needed additional proof as to the competitiveness in the market, the average sale cycle for a single family home Nationally has gone from 66 days in October 2019 to 45 days in October 2021 and in the greater Boston area that figure is down to just 30 days from listing date to closing.  

The government is doing what it can in the short term to help buyers stay in the market.  The Federal Housing Finance Agency recently updated the loan limits for Freddie Mac and Fannie Mae-backed mortgages which in Norfolk, Middlesex and Suffolk counties means conventional loan limits will increase to $770,500.  According to Mr. Ratiu, “The higher limits will give buyers who face higher-priced homes the opportunity to qualify for a conforming mortgage, which provides for lower down payments and better mortgage rates, among other benefits.”

Average rents continue to beat 2020 figures YoY as inventory remains low.  The higher in-demand studios and one-bedroom apartments are averaging 6% increases YoY in the greater Boston area whereas the larger 2-bedroom rents are closer to even YoY, at just .9% increase YoY.  Overall, rents are up around 2% in Boston and 3.4% in the surrounding areas, where like the sales market, demand remains strong and inventory is limited.