It is perhaps the clearest indication yet of how higher interest rates and persistent inflation are tamping down Greater Boston’s once-scorching housing market: the median price of a single-family home in December fell on a year-over-year basis for the first time in four years.
New figures out Tuesday from the Greater Boston Association of Realtors indicate that the median-priced single-family home in the region sold for $740,000 in December, down from $749,000 recorded in December 2021, and the first such annual decline since 2018. And while the decrease was slight when measured annually, home prices have fallen sharply since their peak in June at $900,000.
Despite the lower prices, sales volume keeps falling too. For the full year, there were just 12,487 single-family homes sold in GBAR’s service area, down 14 percent from 2021 and the fewest in more than a decade. Condominium sales fell by 21.8 percent to 10,889.
Those figures are an indication of a market in decline, said GBAR President Alison Socha, an agent with Leading Edge Real Estate in Melrose, though some decline was likely unavoidable after demand reached record heights in the first half of the year.
“The market is certainly declining, but we knew that there was going to be some level-setting eventually,” said Socha. “We had so many excess buyers in the market during the early COVID-era... That level of demand was not maintainable, and that’s why we’re seeing a market that is turning more towards the modest side.”
But inflation, and the Federal Reserve’s efforts to tame it, have clearly slowed the market too.
Higher mortgage rates have pushed many buyers out of the market entirely. The national average rate on a 30-year-fixed rate mortgage currently sits at 6.33 percent, slightly lower than late 2022, but still close to double what it was this time last year, according to Freddie Mac. At that rate, a monthly payment on the median-priced house in Greater Boston is more $1,000 higher than it was on the same-priced house a year ago.
“For the last few years, housing market activity has been so hot that inventory was unable to keep up – and our numbers reflect that,” Tim Warren, CEO of real estate analytics firm The Warren Group, said in a statement. “Add in economic uncertainties and the fact that mortgage rates are nearly double what they were a year ago, and you have the making for a cooling housing market.”
Mortgage rates have also dissuaded some would-be sellers from putting their home on the market, said Socha, because interest rates on a mortgage to buy a new home would be so much higher than what they’re currently paying. New listings fell by 27.6 percent in December compared to the same month in 2021, and sales of single-family homes fell 30.2 percent from the prior December.
But buyers be warned. The housing market naturally dips in the winter months, and Socha said she expects demand to rebound, at least partially, this coming spring. For that, Socha said, the region’s deepening housing supply crisis is to blame.
“Because we don’t have enough homes for all of our residents, there are always going to be people looking to get into a home,” she said. “So the market is declining now because it has to recover from the demand of last year, but it’s hard to imagine it will stay that way.”