At the end of 2019, Mary Kate Robinson moved in with her parents on Cape Cod while she looked to buy a single-family house, town home, or condominium in Plymouth.
Talk about lousy timing.
Starting in March 2020, the COVID-19 pandemic set off a real estate frenzy, pushing median single-family prices in Plymouth up 43 percent, from $380,000 in 2019 to $545,000 in 2022, according to The Warren Group, a Peabody-based real estate analytics company. Over the same three-year period, Plymouth condos went up 21 percent, to $505,000. Then, in March of 2022, the Federal Reserve began raising interest rates in an attempt to bring inflation under control. Thirty-year mortgage rates have almost doubled since.
Now, Robinson, a 30-year-old accountant with The Black Dog restaurant group, is in her fourth year of living with her parents. She is trying to find a two- or three-bedroom in her price range — a max of $375,000 — and hold to her monthly housing budget of about $2,200, including taxes and homeowner association fees.
“Frustrating and annoying would be two great words for it,” Robinson says. “You see a perfect option pop up and you know it’s [immediately] going to go for over-asking.... As a first-time home buyer, it’s scary to move at that kind of pace.”
Sound familiar? With remote work still an option for many, a surplus of cash, and the wish for more space, much of Massachusetts real estate in 2022 was achingly like Massachusetts real estate of years past. Prices continued to rocket skyward over the past five years.
The climb continued in 2022, averaging an 8 percent increase statewide compared with 2021, according to Tim Warren, CEO of The Warren Group. Median prices in some communities around Boston were up as much as 16 percent over the previous year, and up 80 percent to 100 percent over five years.
All of that happened despite a skunk at the picnic: Rising mortgage rates affected not only how much home buyers could afford to borrow, but whether homeowners were willing to sell if it meant trading a low rate for a higher one.
In normal times, higher mortgage rates should mean lower prices. But the current lack of inventory means that while the market might have slowed, prices are likely to stay pat or climb, albeit more slowly, real estate experts predict. With the spring sales season just getting underway, 30-year mortgage rates dropped to 6.32 as of March 30 after reaching 7.08 percent in November, according to Freddie Mac. So don’t expect any big drops soon.
“If you take the whole year 2023, I think [prices are] going to just be pretty flat,” Warren predicts. “Not the 8 percent gain of last year, but not 8 percent negative, either.”
In 2022, some towns and neighborhoods were way over that statewide 8 percent average increase. Newbury saw a 28 percent increase in the median price for a single family, from $715,000 in 2021 to $915,000 in 2022. Since 2017, there’s been an 84½ percent increase, according to The Warren Group.
In Boston and Cambridge, the 2022 median price of single-family homes and condominiums remained stratospheric in some pockets: $2.8 million on the south slope of Beacon Hill; $2.2 million in Bay Village; and $1.8 million in West Cambridge, according to real estate brokerage Redfin. That put pressure on traditionally lower priced neighborhoods such as Mission Hill and Mattapan, where medians have jumped 51 percent and 37 percent, respectively, since 2017.
In the suburbs, some of the biggest percentage gains continued to be either in high-end towns such as Weston (with a 2022 median over $2.2 million) or in outlying metro areas such as Lawrence, Lowell, and Brockton, where medians are up 60 percent in the last five years but remain under $500,000. That made Brockton — with its $430,000 median — popular with buyers priced out of nearby towns like Easton, which has a median price of more than $600,000.
“They’re getting yard space, they’re getting a decent single-family house,” Alex Jean-Baptiste, who owns Just The Best Real Estate in Plainville, part of Keller Williams, says about Brockton buyers. Even if buyers didn’t originally have Brockton on their list, they’re won over quickly.
So what forces are driving a market that has turned even older cities such as Brockton into major draws for homeowners?
For one, interest rates determine affordability. “Where [buyers] are has everything to do with their monthly payment and what is comfortable in their budget,” says Alison Socha, a broker with Leading Edge Real Estate and president of the Greater Boston Association of Realtors. “As opposed to feeling like you can just say, ‘Well, I was always shopping for a $600,000 house, condo, etc.,’ you’re going to say, ‘Well, no, I’m looking at $3,000 a month.’”
Consider the unrelenting math for Mary Kate Robinson. If she had been able to buy in early March 2022, before rates went up, she had a shot of keeping to her budget. She could have put down 15 percent on even a $375,000 property and, with a mortgage rate of 3.85 percent, kept her monthly budget under about $2,200, depending on taxes and HOA fees. Now, with rates at 6.42 percent, she’s looking at another $500 a month, putting her over budget.
And Robinson isn’t the only millennial trying to buy a house. That generation, usually defined as those born between 1981 and 1996, numbers 72.1 million, just topping the 71.6 million baby boomers (born 1946 to 1964), according to the Pew Research Center. Millennials lag behind the generations ahead of them on homeownership. Sixty percent of 40-year-olds now own homes. By comparison, 64 percent of Gen Xers (born 1965-1980) and 68 percent of baby boomers owned homes at the same age, according to estimates by Apartment List, a national rental listing service.
And supply remains short because those pesky boomers aren’t moving — either they’re healthy and don’t need to, real estate experts say, or they’ve paid off the house or have a low-rate mortgage. If they do move, empty nesters are competing with first-time home buyers for popular “right-size” homes.
Meanwhile, we’re not creating enough housing. The National Association of Realtors defines the Boston-Cambridge-Nashua metro area as having a “high housing shortage” based on the ratio of new jobs to the number of new housing unit permits. But builders are also dealing with inflation, as well as increasing rates on short-term loans, experts say.
“Normally when prices go up, you would expect there to be more building, more supply,” says David Luczkow, a senior loan officer with Right Key Mortgage in Easton. “Well, it’s been very difficult because of the increase in building costs and also the supply chain issues are making it hard for builders to get the materials.” There also remains a lot of cash in the market, especially in areas such as Plymouth, Cape Cod, and parts of the North Shore that have strong second-home markets, Luczkow says. That’s a problem for borrowers like Robinson because sellers love cash buyers. “It’s a housing affordability crisis,” Luczkow says.
And yet, properties continue to sell and buyers find a way. In towns such as Lawrence, it’s often via multifamily properties or with multiple generations contributing to the cost, says KiKi Quiles, an agent with Century 21 North East. “Our buyers, they don’t want to leave Lawrence if they grew up in Lawrence,” she says. “A lot of them have businesses that they just want to surround themselves with, and they’re home.”
For now, Robinson is watching the market and crossing her fingers. She likes the vibrancy and convenience of downtown Plymouth but has expanded her search to Wareham and Sagamore Beach, part of Bourne.
“My dream would be some kind of town home option with maybe neighbors on either side, but not so much an apartment complex feel,” she says. “[My parents are] in no rush to kick me out, which I’m very, very grateful for. But I am also 30, living with my parents, so there’s my own personal time clock.”
EXPLORE THE TOP SPOTS PACKAGE BY REGION:
HOW WE SELECTED THE TOP SPOTS TO LIVE FOR 2023
Determining a “best” place to live is a subjective exercise, one with as many possible outcomes as there are home buyers. To arrive at this annual list of Top Spots, we rely on the finite but nonetheless valid wisdom of supply and demand: Sharply increasing home prices suggest that these are communities many people want to call home. We analyzed median home prices from 2017 and 2022 to find the biggest five-year increases across three price tiers for each region. In the suburbs, we looked at single-family data from The Warren Group, excluding communities with fewer than 50 sales in 2022. For Boston and Cambridge neighborhoods, we used median home price data — which include both single-family and condo sales — from real estate brokerage Redfin.
Susan Moeller is a frequent contributor to the Globe Magazine. Send comments to email@example.com.