Mortgage interest rates are almost double what they were a year ago, but the prices of single-family homes and condominiums in Massachusetts continued to set new records and erode paths to homeownership in July, real estate market analysts said.
The Warren Group’s report on July sales activity showed that sales of both single-family homes and condominiums declined year-over-year last month, down more than 23 percent and more than 14 percent, respectively. But with intense competition for the relatively scarce inventory of homes and condos for sale, median sale prices reached new all-time highs for July last month.
“Demand is obviously still strong among prospective buyers, but inventory can’t keep up,” Cassidy Norton, associate publisher and media relations director at the real estate data firm The Warren Group, said.
There were 4,085 single-family homes sold in Massachusetts in July, down 23.1 percent from July 2022′s 5,314 transactions. The median sale price of a single-family home climbed 4.3 percent from last July to the new monthly record high of $610,000, The Warren Group said.
Through the first seven months of 2023, there have been 22,657 single-family home sales across Massachusetts, a drop of 24.6 percent compared to the first seven months of 2022. And the year-to-date median sale price of a single-family home has increased 2.3 percent compared to the same period in 2022 to $565,000, The Warren Group said.
As of Monday, the average interest rate on a 30-year fixed-rate mortgage was 7.247 percent APR, according to Zillow data compiled by NerdWallet. A year ago, the average interest rate was 5.267 percent, NerdWallet said.
Theresa Hatton, CEO of the Massachusetts Association of Realtors (MAR), said summers generally bring “a hot real estate market,” but that the state’s chronic lack of inventory is holding the Bay State market back from achieving year-over-year growth.
“With the competitive buying market, we are seeing, many potential sellers are refraining from listing their homes due to the attractive existing mortgage rates they have combined with the stress of entering the buyers’ market after their current home sells,” Hatton said in a statement.
MAR said that new listings in July decreased by 26.7 percent for single-family homes and by 17.6 percent for condominiums, year-over-year. Year-to-date, new listings compared to 2022 are down 25.1 percent for single-family houses and down 20.6 percent for condos, MAR said.
The competitive market and scarcity of homes for sale has been a boon to sellers. MAR said the single-family homes that sold in July went for an average of 102.9 percent of their original list price.
Condo sales activity and prices largely mirrored the single-family home market in July, The Warren Group said. The month’s 1,886 condominium sales marked a 14.3 percent decrease from the 2,201 condo sales in July 2022, but the median sale price increased 6.5 percent year-over-year to a new all-time July high of $555,000. So far in 2023 there have been 11,270 condo sales in Massachusetts, a 22.2 percent decrease compared to the first seven months of 2022, and the median sale price has climbed 4 percent to $519,900.
“Historically, condos have been a more affordable alternative to single-family homes, but with the median price hovering above $500,000 for the last three months, prospective buyers will be hard-pressed to find an easy route to homeownership,” Norton said.
The unaffordability of housing in Massachusetts accelerated as the pandemic hit in 2020 and has led to housing insecurity for many Bay Staters at the same time that the state is seeing a hard-to-manage surge of immigrant families coming to Massachusetts in search of shelter and work.
When Gov. Maura Healey rang alarm bells about the shrinking capacity of the state’s emergency shelter system and declared an emergency, she said that one of the reasons that “we find ourselves in this situation” is the state’s “long-standing shortage of affordable housing.”
The high cost of living in Massachusetts also puts a damper on the state’s efforts to compete against lower-cost spots like Florida, Texas and North Carolina for increasingly mobile residents and workers. Healey took office in January promising to tackle the “barriers that are holding back our people and our state,” like the “out of control” cost of housing.
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