The inventory of homes for sale in Massachusetts — nationwide, actually — has been declining for years, and the COVID-19 pandemic has only made things worse. High demand, a dearth of inventory, and low interest rates are pushing the Boston area’s high real estate prices even higher. And housing experts say the end is nowhere in sight.
It’s not that homes aren’t selling. In each of the past three years, a little more than 103,000 condos, single-family, and multifamily homes were sold, according to data from The Warren Group, publisher of Banker & Tradesman. The problem? There are many more buyers than homes for sale. Many homes sell quickly, some for over the asking price, and buyers often have to submit bids on multiple homes over many months before they get an offer accepted.
In June, inventory dipped below one month’s worth, according to an analysis of Multiple Listing Service data by Lamacchia Realty. An inventory of three to four months is generally considered a balanced market. When inventory is higher than that, it’s a buyer’s market. The current market favors sellers heavily, but that’s not just bad for buyers; rents are tied to home prices. Housing costs in Greater Boston are rising for everyone.
Chris Herbert, managing director of the Joint Center for Housing Studies of Harvard University, said the success of the Greater Boston economy keeps drawing higher-wage workers to the area, driving up demand while we’re simultaneously building far fewer houses than we did 30 years ago. Plus, as a coastal city, we can’t expand east.
“What would it take to have a different outcome? That goes back to the regulations and fitting more housing into the land we have,” he said. “That will require greater density, like town homes and cottages. That’s a really challenging issue in New England, where municipalities have great control over land use. Until we create more housing, continued upward pressure on housing is likely to happen. It doesn’t have to happen, though.”
According to the Massachusetts Housing Partnership, the state’s “annual housing production is only about half of what it was in the 1960s, ′70s, and ′80s. We permit 36 percent less new housing per capita than the national average, ranking us 38 out of the 50 states.”
Herbert said we’re on a trajectory similar to San Francisco, where in July the average single-family house sold for $1,450,000, according to Redfin.
Governor Baker’s proposed Housing Choice bill aims to create 135,000 housing units by 2025. It would allow developers to build more housing developments by a simple majority vote of city or town legislative bodies instead of the required two-thirds supermajority. It also would allow accessory dwelling units, or “in-law apartments,” to be built in many places where they are currently not allowed.
The bill, first filed in 2017, did not pass but was reintroduced last year.
Manikka Bowman, director of policy and outreach at the Urban Land Institute, said without zoning reform, there is no pathway to more housing.
“Changing the policies on the books in communities throughout the Commonwealth is going to be hard, but we have to tackle those issues because if we don’t, it will slow our economy down and the people it will hurt the most are middle- and lower-income families,” Bowman said. “Historically, that means families of color that haven’t had the privilege and ability to leverage land use and investments to build wealth.”
“Zoning changes can have an effect, but it will take time,” Hale said. “New construction is needed to solve this challenge. A net increase in inventory is going to have to come from new construction. Finding ways for builders to build is how you add to inventory.”
Anthony Lamacchia, owner of Lamacchia Realty, said every buyer should interview real estate agents before they begin their home search but most don’t. He said buyers should ask prospective agents how they find properties in addition to searching the Multiple Listing Service. In his blog, he writes in detail about how buyers should prepare for the intensely competitive market.
He also said a bit of relief may be on the way.
“Buyer and agent frustration and discouragement are at the highest level I’ve ever seen,” Lamacchia said. “It’s a very tough time to be a buyer, but it’s about to get better. We are right at the beginning of the increase in inventory we see every year right after Labor Day. It’s still a seller’s market, but there’s no better time of year to buy than the fall.”
Jim Morrison can be reached at JamesAndrewMorrison@gmail.com. Subscribe to the Globe’s free real estate newsletter — our weekly digest on buying, selling, and design — at pages.email.bostonglobe.com/AddressSignUp. Follow us on Facebook, Instagram, and Twitter @globehomes.