The region’s housing market continued its stratospheric spring, with prices reaching new records in April. But there’s a growing sense that the peak may be near.
The median price for a single-family home in Greater Boston climbed 11.2 percent last month compared with a year prior, to $845,000, according to the Greater Boston Association of Realtors. Condominium prices rose even faster, up 16.5 percent to $716,500. Both are the highest prices ever recorded by the group, which tracks home sales in 64 Boston-area communities.
The sky-high prices come amid a surge in interest rates, which have jumped, on average, more than two percentage points since the start of the year for a 30-year fixed rate mortgage. That adds hundreds of dollars a month in mortgage payments for buyers already grappling with costs that have climbed roughly 30 percent over the last two years. At some point, said GBAR president Melvin Vieira, there is a limit to what people can pay, and sellers will need to adjust their expectations.
“Double-digit price growth is not sustainable long-term, especially in a rising interest rate environment,” said Vieira, who is an agent at Re/Max Destiny. “We’ve been seeing fewer offers on properties since last fall, and now we are seeing more price adjustments and homes sitting on the market for longer too. We could be nearing the ceiling on prices.”
Not yet, though. The market is being buoyed by an extremely tight supply. The number of single-family homes listed for sale so far this year is down 10 percent, with sales volume off by 13 percent; the condo market is similar. Multiple-offer scenarios and bidding wars remain common, especially in more desirable parts of the region. And houses are typically sitting on the market for less than two weeks while selling for, on average, eight percent above asking price.
A key issue preventing an increase in inventory, said Vieira: Would-be sellers feel like they have nothing to buy and no place to go. So they stay put, keeping their current home off the market. Interest rates rising above what many homeowners who’ve bought or refinanced in recent years are paying will only contribute to that, he said.
“A common factor that’s holding back homeowners from listing is the fear they won’t be able to find another home to purchase when they sell,” he said. “Now with mortgage costs climbing that is going to limit the amount of home one can afford and could suppress future sales and price growth.”
But that’s down the road. So far this spring, housing prices here are only going in one direction.