Where is the inventory? This has been one of the biggest questions of 2023, with homebuyers struggling in an exceptionally tight real estate market, particularly in Boston area suburbs.
Real estate inventory in Massachusetts has been falling for years, but the Pandemic and higher interest rates have worsened the situation. According to the Massachusetts Association of Realtors, 4,563 single-family homes were for sale in June, a 41 percent drop from June 2022. In June 2017, there were nearly 17,000 single-family homes for sale. Condominiums for sale dropped 35 percent in June on a year-over-year basis.
After several years of record-low interest rates, the dramatic rise in mortgage rates has left many would-be sellers reluctant to sell. This is often referred to as the “lock-in” effect, referring to sellers staying put in their current homes and holding onto a lower interest rate. If homeowners were to sell their homes and buy new ones at today's interest rates, they would have to take on a significantly higher monthly payment due to the increased mortgage interest rates. As a result, many homeowners are simply staying put, even if they would like to move.
The "lock-in" effect is having a significant impact on the housing market. The number of homes for sale is at historic lows, driving up prices. In many Massachusetts cities and towns, homes sell for tens of thousands of dollars above their asking price, making it difficult for home buyers to find a home.
When might all of this change? If rates begin to come down, we expect that more sellers will enter the market. According to Redfin, 27 percent of U.S. homeowners considering listing their home within the next year would feel more urgency to sell if rates dropped to 5 percent or below. Almost half (49%) would feel more urgency if rates were to drop to 4 percent or less, and the share increases to 78 percent if interest rates drop to 3 percent or below, an improbable situation any time soon.
In the meantime, it seems that home buyers will continue to face challenges when searching for a home. However, those who have had successful home searches have done so because of their unwavering persistence. In other words, you can only find a home if you're looking.
For homebuyers who need to purchase this year, it can be an exercise in patience, perseverance, and sometimes flexibility on locations. Working with a trusted and knowledgeable agent is key to your success. As always, please reach out to me at any time for current market conditions and to discuss your real estate needs.
Contact Andrew McKinney if you're interested in learning more about the inventory in Boston and the surrounding area. Andrew has spent the last 15 years living and working in Boston, so he is well-versed in both the city's inner workings and the city's diverse real estate market. Call (617) 501-0233 or contact [email protected] to get in touch with us
Attorney Andrew McKinney, formally of Buyers Brokers Only, LLC is an exclusive real estate agent with 13 years of experience in the Boston area having completed over $250 million in transactions. Andrew works with buyers and sellers at all market segments in Boston and the surrounding cities and towns including Cambridge, Somerville, Brookline, Newton Needham, Arlington, Belmont, Watertown, Medford and Melrose. As an attorney and an MBA, Andrew brings a unique skill set and level of professionalism that sets him apart from other agents in the area.