It’s been a tough year for Greater Boston homebuyers, and things don’t look to be getting easier anytime soon.
August was one of the slowest months for the region’s housing market in recent decades, with the number of home sales hitting their lowest point for the month since 2010, according to new figures released Monday by the Greater Boston Association of Realtors.
Just 1,090 homes were sold last month in GBAR’s coverage area — which includes most of Greater Boston but excludes the North and South Shores — a 26 percent drop from the 1,471 sold in the same month last year. Condominium sales slouched too: only 787 were sold across the region in August, down 23.7 percent from August 2022. Analysts said higher interest rates, on top of the region’s long-standing shortage of homes for sale, have made a brutal market even harder.
“The lack of inventory along with today’s higher mortgage rates has not only handcuffed home buyers, it’s created indecision on the part of prospective sellers too,” said GBAR President Alison Socha, an agent with Leading Edge Real Estate in Melrose. “Many owners are opting to stay put rather than sell over concerns they’ll be unable to find a new place to live or have to pay a higher rate loan, and that’s keeping properties off the market.”
When the market slows down like it has this year, it’s not just bad for buyers because there are fewer homes listed to choose from, it also tends to mean that there is more competition for the few homes that are for sale, which pushes prices upward.
That’s exactly what has happened. After hitting record highs in May, June, and July, home prices receded slightly last month, as is typical for August, but remained near an all-time peak. The median-priced single-family home in the region sold for $881,00 in August, up around 7 percent from the same time last year. The median-priced condo sold for $685,000.
August is usually one of the busier home buying months of the year, but persistently high interest rates — at least compared with the low rates of the two last decades or so — have kept prospective buyers out of the market, and discouraged residents who may want to sell their home but would have to pay a substantially higher interest rate to buy something new.
“Despite rising mortgage rates and diminished purchasing power, we’ve seen steady price appreciation over the past year as many buyers have found themselves having to outbid one other for a shrinking number of properties for sale,” said Socha. “Even though buyer demand is not as strong as it’s been in recent years, listings have become so scarce over the past couple of months there’s been more than enough competition to keep prices from dropping significantly.”
It’s not difficult to understand why homeowners don’t want to sell right now. Last week, the average rate on a 30-year fixed-rate mortgage nationally was 7.18 percent. That’s the second-highest rate recorded this year, and higher than any other mark set since 2002, according to Freddie Mac.
Just a year and a half ago, that rate was hovering around 3 percent, a difference that can amount to hundreds of dollars on a monthly payment, perhaps more. The vast majority of homeowners have mortgages well below the current rate, meaning if they sold their house now, buying something new at the same price would come at a higher monthly cost.
In other metropolitan areas, that dynamic has caused house prices to begin dropping. Home prices in Austin, Texas, for example, have dropped around 10 percent over the last 12 months.
But not in Greater Boston. Our housing shortage is so severe that buyers are willing to stomach those higher rates and continue to compete for homes, keeping prices high.
“The market may have cooled, but many sellers are getting their asking price and accepting an offer in just three week’s time,” said Socha. “With fewer homes on the market sellers are seizing the opportunity to ask for top dollar, and they’re frequently getting their price if the property is in excellent condition and a desirable location.”