‘We walked into a buzzsaw’: This spring, Greater Boston’s housing market is tougher than ever

Between surging interest rates and record-low inventory, it’s even harder than usual to buy a house around here right now.

Emily Luong, her husband, Tony, and their 5-year-old daughter, Olive, in their recently purchased home.Matthew J Lee/Globe staff

The gun in the attic was a surprise.

Emily Luong and her husband, Tony, knew they were in for some unexpected and likely unwelcome discoveries when they bought the century-old home in Arlington, waiving inspection and agreeing to pay $76,000 over asking price.

It was in bad shape, with original single-pane windows and cloth-wrapped wiring, asbestos and mice in the basement. The backyard had standing water and the stove didn’t work.

Then, after moving in last year, they found a 1940s-era shotgun that had gone unnoticed by the prior owners for decades.

“We walked in and were like, ‘OK, we love this house, and we feel like there’s potential because it has to be gutted,’” Emily Luong said. “It was just crappy enough that a lot of people wouldn’t want it.”

Pressures on the Massachusetts housing market, long marked by meager inventory and ever-escalating prices, have intensified to a frenetic point. Buyers are paying eye-popping money for what would be considered rejects in normal circumstances. The Luongs, outbid in six attempts for other homes, ended up paying $825,000 for what is essentially a total rehab.

For many buyers, once unthinkable steps, such as waiving inspections or mortgage contingencies, are now commonplace. Prices have risen to record highs — with the typical single-family house in Greater Boston now routinely topping $750,000 — and the intense demand that erupted after early COVID-19 lockdowns hasn’t slowed.

“We’ve talked for decades about price increases and limited supply, and Greater Boston always faces that. Now... I would characterize it as on steroids,” said Alicia Sasser Modestino, an associate professor and research director of the Dukakis Center for Urban and Regional Policy at Northeastern University. “I think it’s unprecedented. I don’t think I’ve seen a housing market like this before, ever.”

Emily Luong, her husband, Tony, and their 5-year-old daughter, Olive, in their recently purchased home. Matthew J Lee/Globe Staff

For many would-be homebuyers, the biggest challenge right now is interest rates, which have jumped on average more than two percentage points since the start of the year. That can mean big increases in monthly payments, as it did for first-time homebuyers Ligia Alfonzo and her husband, Derek Fravel. After a “horrible,” “super stressful,” and “anxiety-inducing” search this year, the couple closed this month on their first home, in Pembroke.

The sellers accepted their offer, but had to find a new house before completing the sale. That took three weeks. And in that time period, Alfonzo’s interest rate increased from 4.6 percent to 5.6 percent. She and her husband had expected to pay about $3,000 in monthly mortgage payments; now, their payment will be $3,500.

“Those three weeks cost us a whole percentage point,” she said.

It was too late to back out: Alfonzo and her husband would have lost their deposit, and possibly been sued. So they set a closing date and locked in a mortgage, just before receiving notice from the landlord at their apartment in Quincy that their rent was increasing by $200 a month, not the multiple hundreds they had been expecting.

“It was like, ‘OK, we did all this for nothing,’” Alfonzo said.

Emily Earle and her husband were also not prepared for interest rates to go up so quickly. The couple had been renting in southern New Hampshire, saving for a down payment, and they were pre-approved for a mortgage with a 3.1 percent interest rate. Now it’s up to 5 percent, and they’re still hunting.

“That is hundreds and hundreds of dollars more than we would have been paying, even in December,” Earle said.

Earle and her husband started looking last year, wanting to reap the benefits of remote work, and perhaps start a family. They weren’t expecting the market to be so brutally competitive.

“It’s like we walked into a buzzsaw,” Earle said. “It wasn’t just our price range. There just wasn’t anything there.”

Recently, the couple was outbid by $52,000 over asking price for a home in Newton, N.H. They were one of 18 offers. It’s demoralizing, Earle said, and often feels impossible. She and her husband have looked for rental houses, but “those are impossible too,” Earle said. They’re now staying in an Airbnb.

“We might be Airbnb-hopping this summer, which is ironic, because I feel like Airbnb is also contributing to the crisis that we’re in right now,” she said. “I feel like we’re sitting in this Catch-22. It’s wild.”

A few years ago, Haley Cutter’s clients would make a list of what they wanted in homes. They’d insist on having every box checked. The agent at Cutter Luxe Living by Compass now advises they make a list of pros and cons instead.

“Right now, I have not seen anybody move into a home where every box is checked,” Cutter said.

Cutter is currently working with buyers in Wellesley, where lately every house listed under $1.5 million went under agreement within three to four days. Homes are selling well above asking price, Cutter said, and there seems to be a strategy of pricing below market value to spark a bidding war among buyers. She’s heard stories of buyers FaceTiming their contractors from open houses, or just bringing the contractor along, because they don’t want to wait for an inspection.

“Even in the beginning of COVID, we did not see this,” she said. “You’re going to sell your house in a weekend if you put it on the market. … You could make a lot, but where are you going to go?”

It’s not just Boston; prices are surging around over the country. But there are signs, in some places, the housing market may be topping out. Price increases are moderating. More properties are coming on the market. National real estate brokerage Redfin reported the number of tours its agents gave fell 19 percent between mid-April and mid-May, its biggest drop since April 2020.

But even if the market cools, few expect the sort of crash seen in the late-2000s. A collection of factors, driven both by the pandemic and demographic trends, make this cycle different, said Modestino, of Northeastern.

With a huge boom in pandemic-delayed weddings, millennials reaching their peak homebuying years, and Generation Z also looking to enter the housing market, the household-formation engine has roared back to life. At the same time, the pandemic has spurred empty-nester Baby Boomers to consider retirement and downsizing to an apartment or condo.

Selling isn’t the problem. It’s finding a place to go that’s the big issue. And even if empty-nesters are ready to pay a premium to downsize, a recent surge in inflation has bitten into their savings. The volatility in the stock market, which has taken a huge bite out of retirement savings, isn’t helping either.

In a normal business cycle, these factors would play out much slower, perhaps over the course of a decade, Modestino said. But now, they’re coming together all at once.

“We have made all these things happen simultaneously, and that’s just put way too much pressure on the market,” Modestino said. “It’s not going to suddenly abate on its own.”

And even those who “win” in this housing market often have a lot of work to do. For Luong and her husband, in Arlington, the $825,000 they spent on their fixer-upper was just the beginning. They have invested about $65,000 so far in repairs, remodeling the kitchen, updating plumbing and wiring, and fixing outdoor drainage issues.

Still, Luong considers the couple lucky — privileged, even — to have found a home.

“We really love it,” she said. “To this day, our realtor and the seller’s agent have no idea why they chose our offer. If they had waited five more days, they would have likely gotten $100,000 more.”