Advisors Living presents the Residential Market Reports for Q4 2022. This comprehensive study includes Greater Boston and many prominent nearby suburbs. The Advisors Living dedicated research team used data that we deem reliable from sources such as MLS PIN, LINK, MAR, NAR, and public sales records through the Registry of Deeds.
The fourth quarter was a turbulent one for residential real estate as the drastic rise in mortgage interest rates changed Buyers’ motivation and ability to buy. Meanwhile, large numbers of potential Sellers who currently enjoy historically low-interest rates seem to have chosen to remain in their current homes. There were 11% fewer single-family homes listed for sale across Massachusetts last year when compared to 2021. This shortage of available inventory led to a 4% increase in Average Sale Price in the last quarter of the year despite the higher cost of financing a home purchase. Many cities and towns experienced abrupt swings from week to week as the real estate market reacted to the sharp rise in interest rates, severe shortage of homes for sale, sale prices continuing to rise, and Buyer demand remaining strong.
Most of Boston’s neighborhoods experienced a decline in units listed and transacted, and an increase in selling prices. Key metrics include units listed city-wide were down 12% and consequently 24% fewer homes transacted. The median sales price increased 5%, now at $725,000. Additionally homes on average sold one week faster than the prior year, in approximately one month. Another indicator of a competitive market for buyers was that homes sold on average for 99% of their original asking price, a one-point increase. The most competitive price point for buyers was condos priced between $700,000 - $800,000, where homes sold on average in 24 days and for 100% of their asking price, leaving little room for negotiation.
The energized atmosphere among suburban home Buyers softened slightly in the fourth quarter, enabling many to submit offers at or below asking price. We also saw the return of home inspection and mortgage contingencies with offers, two conditions that were commonly rejected by Sellers during the preceding 18-month period. With the continued trend of historically low numbers of homes for sale, many suburban communities saw prices increase in the fourth quarter leading to record-setting high selling prices in some areas. In 2022, every suburban County adjacent to Boston saw an increase in Median Sale Price between 7% and 9% compared to 2021. Meanwhile, the sale price increase over a five-year period ranged from 30% to 40% in these Counties (Essex, Middlesex, Norfolk and Plymouth).
While the third and fourth quarters of 2022 saw tight inventory keeping prices stable among New Developments, several projects including Stratus in Brighton, are slated to start closing early this year and are expected to bring a boost in average sales price. Meanwhile, several ultra-luxury developments that continue to be actively marketed, including Winthrop Center, St. Regis, Raffles, and One Dalton, can expect competition as new luxury projects launch (South Station, 1515 Commonwealth). A number of smaller developments (fewer than 40 units) will make their debut this year, including the first net zero building in Somerville, expected in Fall 23. While the sellers’ market prevails, it is possible we will start to see a shift that will favor buyers if interest rates do not subside and several projects that were previously delayed are approved in 2023, leading to an increase in inventory in some areas.
The long-term housing deficit is unlikely to change any time in the near future, but falling mortgage rates could help get more homes listed for sale. Many economists, including the National Association of Realtors, are forecasting a stable year ahead with an ongoing lack of available homes for sale keeping pressure on the market and avoiding widespread price drops. If the job market remains strong and mortgage interest rates stabilize below the drastic highs from Fall 2022, Buyers and Sellers are expected to continue to trade at a healthy, although less frantic, pace.
The 2023 Real Estate climate promises to be dynamic. Our Residential Advisors are experts in their local markets and will help you achieve your Real Estate goals. From the city to the suburbs, and from Nantucket to Maine – our team of respected advisors and our leadership team look forward to collaborating and advising on your next transaction.
