What will happen with housing prices nationwide and in Massachusetts in particular in the next year?
Moody’s predicts that home prices will fall across the country in 2023 and 2024, based on the nationwide 12% dip in prices between June 2022 and February 2023. As of February, the median sales price for a single-family was $363,000, down from $413,800 last June. Moody’s predicts a recession in late 2023, no easing on lending rates, and increased unemployment – all of which will keep prices down.
Prices are falling most dramatically in large Western and Southwestern cities like San Francisco, Seattle, Denver, Las Vegas, San Diego and Phoenix. The Southeastern and Northeastern states are still holding value.
The dramatic chart below shows how mortgage applications have plummeted as the interest rate has risen in late 2022.
And while prices are decreasing, Moody’s stresses that this is a market correction, adjusting downwards after the extreme spike of prices during the pandemic, and not a crash. They predict prices will continue to fall by 5 to 10% by 2025, but they will still be about 30% higher than they were in 2020 before the pandemic. An overall increase in value of 30% over five years is a good return on housing investment.
Housing need will continue strong, according to Moody’s, as the national market has a 1.5 million unit shortage.
What about Massachusetts?
The Mass Association of Realtors’ February report showed that sales of existing homes declined for the 12th month in a row and the sales of new homes were lower in January 2023 than in January 2022 or January 2021, but if we look back to pre-pandemic days, sales are up. So the 18 months or so of the pandemic realty frenzy (March 2020 – September 2021) can be considered an anomaly, and probably should be.
A March 22, 2023 article on Boston.com by Vivi Smilgius and Eileen Woods on Boston.com gives a deep dive analysis of the Warren Group’s Housing Report and shows us that residential property is still increasing in value in the state as a whole:
But in Greater Boston, residential real estate is finally starting to fall in price, showing that market correction that Moody’s suggests is happening across the country:
Although the prices are declining in Greater Boston, they are still much higher than the median prices in the state as a whole.
The Warren Group shares a breakdown by county of median prices and volume of single-family sales between February 2022 and February 2023. Only two counties saw a decrease in sales prices compared to the previous year(Norfolk at 3.8% and Middlesex at 0.9%), but all counties had a double-digit decrease in volume of sales – except Norfolk, which had an increase in sales volume of 3.9%. The data is below:
The condo market shows even larger dips in volume of sales, and has more loss of sales value than gains:
So while prices are up overall in Massachusetts, inventory and number of sales are down and each county is quite distinct in housing market data.
Realtors often look to Spring as a time of increased sales. Will more homes and condos come on the market this Spring in Massachusetts? Only time will tell.