The Massachusetts real estate market has been experiencing significant changes recently. With the median sale price increasing by 0.3% year-on-year in April 2023, and a 27.2% drop in the number of homes sold, it's clear that the market is in a state of flux. However, despite these shifts, experts believe that the market is unlikely to crash in the near future. In this article, we'll explore the current trends in the Massachusetts housing market and provide insights into what the future holds.
Massachusetts Real Estate Market Trends
The current statistics for the Massachusetts housing market reflect the national trend of high demand and low supply. As home sales decline across the state, home prices continue to ascend. After a decade of steady home price gains, the market has reached the affordability limit for many homeowners.
Massachusetts Housing Market Statistics
- Average Home Prices: The average median home price in Massachusetts is $586,200, a slight increase of 0.3% year-on-year. Experts predict a drop of approximately 4% in median sale price growth in 2023, marking the first annual drop since 2012. The sale-to-list price ratio is currently at 101.9%, with a decline of 3.2 percentage points year-on-year as of April 2023.
- Home Sales: In April 2023, home sales hit a low of 4,250, representing a significant 27.2% year-on-year decrease.
- Average Rent Prices: The median rent for tenants in Massachusetts is $3,200 in 2023.
- Pending Sales: Pending home sales grew by 0.8% in February for the third consecutive month. As of now, there are 2,651 pending listings for sale in Massachusetts.
- Median Days on Market: The median days on the market for homes for sale was 20 days, an increase of 3 days year-on-year.
Image Source: Redfin.com
The Future of the Massachusetts Real Estate Market
The question on everyone's mind is whether home prices will drop in the second quarter of 2023. According to experts from the National Association of Realtors (NAR), the median sale price is predicted to rise by 8.08% in the second quarter, down 2.5% year-on-year. The housing market is expected to continue warming up, even amidst high mortgage rates and economic uncertainty.
Zillow’s Massachusetts housing market forecast also supports this notion. They reported a 4.4% rise in the national Zillow home value index in March 2023, with an expected increase of 0.6% over the next year. NAR predicts approximately 4.78 million existing home sales in 2023, indicating a positive outlook for the market.
Why the Housing Market is Unlikely to Crash
While some economists believe that the housing market will slow down in 2023, most agree that a crash is highly unlikely. Here are five reasons why experts hold this belief:
- Low Months of Supply: As of May 2023, there is only a 2.6 months’ supply available in Massachusetts. This scarcity of inventory leads to bidding wars and increases the stability of home prices.
- Low Newly Constructed Housing Supply: The supply of newly constructed houses has yet to return to pre-2007 levels. There are also significant hurdles in acquiring land, obtaining regulatory approval, and increasing the supply quickly.
- New Buyers Entering the Market: There continues to be strong demand for homes across various demographics, particularly from millennials and Hispanics. However, there is still a limited amount of inventory available.
- Strict Lending Standards: Unlike the situation in 2007 where anyone could get a mortgage without a credit check, mortgage lenders in Massachusetts now have high standards for borrowers. Most home buyers are required to have an excellent credit score.
- Fewer Foreclosures: The majority of homeowners today own significant equity in their homes, and their personal balance sheets are much stronger than they were 15 years ago. As a result, the threat of rising foreclosures in Massachusetts is low.
Is 2023 a Buyer's or Seller's Market?
The unique conditions of the Massachusetts real estate market in 2023 make it difficult to determine whether it is currently a buyer's or seller's market. Relatively high mortgage rates have deterred some buyers from entering the market, while low inventory and a reduced number of listings indicate sellers' reluctance to sell.
In light of recent events like the fall of Silicon Valley Bank, daily average mortgage rates have fallen from 7% to 6.5%. Additionally, home prices across the nation experienced a sudden decline of 1.8% over a single weekend, leading to a spike of 7% in mortgage applications. However, after the Fed's recent announcement, average weekly mortgage rates have increased from 6.57% to 6.79%. Despite these fluctuations, mortgage purchase applications grew by 17% in February-March.
Massachusetts Housing Market Predictions for 2023
Various economic factors will influence the Massachusetts housing market in 2023. Here are some predictions based on expert forecasts:
- Mortgage Rates Stabilizing: The 30-year fixed-rate mortgage averaged 6.79% in June 2023, up from 6.57% previously. These rates are still lower than last year's peak of 7.08%.
- Fewer Home Sales: Reports predict far fewer home sales for the remainder of 2023 compared to last year, with a significant drop of 27.2%.
- Low Home Prices: Home prices are expected to remain low compared to last year, with a projected decline of 2.5% in most markets.
- Stable Housing Affordability: NAR's chief economist suggests that rates will stay stable for existing homes throughout 2023, and approximately 4.78 million existing homes will be sold.
- iBuyers Likely to Buy Homes Below Market Value: House flipping profits have fallen by 18.4% in the past year. Top iBuyers such as Opendoor have reported significant losses, and both Zillow and Redfin have shut down their iBuyer services in recent years.
The Presence of a Housing Bubble
Experts agree that a housing bubble does exist in the Massachusetts housing market. A housing market bubble refers to a steep incline in prices due to increasing demand and limited supply. Home prices have been steadily rising for the past two years, while inventory remains low at only 2.6 months' supply. Other factors contributing to the bubble include record-high mortgage interest rates and a sharp decline in the number of home sales (down 27.2% year-on-year).
Massachusetts Housing Market Predictions for the Next 5 Years
Over the past five years, home prices in Massachusetts have risen by 40.8%. However, this constant growth is expected to decrease gradually. As mortgage rates continue to increase, homebuyers are likely to delay their purchases, resulting in low demand for housing and a decrease in the growth rate of home values.
Should I Sell My Massachusetts Home Now or Wait?
Approximately 10% of homeowners believe that now is a good time to sell a home. While home prices are still at record highs, some experts predict that many markets will see a decline of 5% to 10%. If you are in a market where home prices are still high, it might be a good time to sell your house in Massachusetts. Consider selling your house in the following circumstances:
- Before Mortgage Rates Reach Record Highs: Mortgage rates may reach 7.8% in the coming year as the Fed tries to control inflation. Compared to 1971, this rate could reach an average of 8% for a 30-year fixed mortgage. As interest rates are still relatively low, many prospective buyers may enter the market now instead of waiting.
- When You Need to Upsize or Downsize: Significant changes in family dynamics may require you to sell your property and move to a different one.
- When You Need to Relocate: If you have a new job, are retiring, or have decided to move to another state, selling your house is unavoidable. The best time to sell a house is when you're ready to move.
Tips for Selling Your Massachusetts Home in a Slow Market
Selling a home in a slow real estate market requires strategy. Here are some tips to help you sell your Massachusetts home:
- Price Your Home Competitively: In a slow market, inventory tends to rise. To get the best deal and quick offers, it's better to price your home competitively.
- Offer Incentives & Seller Credits: Consider offering to pay the buyer's closing costs, reduce repair costs, or provide a transferable home warranty as an incentive. If you can't afford any of these options, you can also sell your house as-is.
- List on the Open Market: Listing your property on the Multiple Listing Service (MLS) gives it the best market exposure, attracting offers from various buyers, investors, and cash home buyers. Consider using a Flat Fee MLS Massachusetts listing service for a quick and efficient process.
- Sell to Cash Home Buyers: Cash home buyers in Massachusetts can make instant cash offers on your house. While they can help you sell your home fast, keep in mind that their offers may be lower than your home's fair market value.
Tips for Selling Your Massachusetts Home in a Hot Market
Selling a home in a hot market provides different opportunities. Here are some tips for maximizing your chances of selling quickly:
- Find the Best Way to Sell: Whether you choose to sell your house yourself or through an agent, consider listing it on the MLS using a Flat Fee MLS Massachusetts listing service. This will give your property maximum market exposure. Additionally, explore the best For Sale By Owner websites in Massachusetts for additional marketing options, some of which are available for a small fee or even for free.
- Make Quick Repairs: Prioritize cleaning and decluttering your home, and make small fixes like repairing a leaky faucet or fixing a shattered window. These small improvements can make a big difference in attracting potential buyers.
- Stage Your Home: Consider preparing your home for sale, either with the help of a professional home stager or by following DIY staging techniques. This process involves cleaning, depersonalizing, and making your home visually appealing to potential buyers.
Should I Buy a Home in Massachusetts Now or Wait?
According to statistics, 77% of people believe that now is a bad time to buy a house in Massachusetts. This sentiment is mainly due to the relatively high mortgage rates in recent weeks, which have limited the number of buyers with strong financial conditions. However, if you are planning to buy now, it is essential to plan your finances carefully and ensure you have 5 to 6 months of savings after making your down payment.
Tips for Buying a Home in a Slow Market
Buying a home in a slow market presents specific considerations. Here are some tips to help you navigate the process:
- Consider the Value of the Property: In a slow market, it's important to carefully consider the value of the property you're interested in. There's a higher chance that home values may decrease before they start to increase again.
- Don't Buy at the Lowest Price: Some sellers may attempt to conceal major defects and sell a Massachusetts house quickly or at a low price. Always get a home inspection report before buying a house that seems too good to be true.
- Don't Invest for the Short Run: Buying a home solely for the purpose of selling it quickly can lead to increased inventory and may not be beneficial in a slow real estate market.
Tips for Buying a Home in a Hot Market
Buying a home in a hot market requires a well-planned approach. Here are some tips to help you navigate a competitive market:
- Research the Local Market: The Massachusetts real estate housing market is highly localized, and market trends can vary from region to region. Thoroughly research the area you're interested in before making a purchase.
- Lower Your Debt: Lowering your debt-to-income ratio will help you easily qualify for a mortgage preapproval when applying for a loan.
- Increase Your Earning Potential: Despite economic downturns and rising mortgage rates, it's crucial to seek opportunities to increase your income. Look for ways to boost your earning potential and strengthen your financial position.
As with any investment, it's important to gather as much information as possible and weigh your options carefully before making decisions related to the Massachusetts real estate market. The insights provided in this article are meant to serve as a starting point for your research and should not be considered financial or investment advice.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Houzeo Corp., its affiliates, or its employees. The information provided is based on reliable sources, but the author does not guarantee its accuracy or completeness. This article is for informational purposes only and should not be used as the sole basis for making investment decisions.
