Posted on Feb. 11th, 2014
In 2013, we saw the real estate market in Massachusetts grew rapidly to one of the best levels reached in terms of both the number of sales and price growth. However, the perspectives for 2014 are not so colorful due to the increasing mortgage rates and the decreasing availability of homes for sale.
The statistics show that last year’s home sale in Massachusetts scored a record of single-family homes sold – almost 50,000 – which was a 5% increase from 2012 and the highest number since year 2006, while the midpoint price was increased more than 10% from 2012 to $320,000 according to the data provided by Warren Group – a company that monitors the activity of the local real estate market.
On the other hand, the sales of condominiums, especially the luxury ones in downtown Boston, were also quite high in 2013. The statistics show that there was an increase of 7% in sales throughout Massachusetts last year. Specifically for Boston, the sales of luxury condos that offered features like parking valets, doormen and concierge services, jumped with more than 50% (compared to 2012). In numbers, this means that 420 properties with media price of 1.3 million were sold according to the data provided by LINK – a company from Boston that monitors the condo sales in the area.
According to Timothy Warren JR, Warren Group’s CEO, the sales are already going back to their low levels. The latest statistics show that the sales in December 2013 were lower than those in the same period of 2012 with 30% for homes in Boston (data by the Greater Boston Association of Realtors), which was a logical continuation of the November’s decline. According to Warren, this is due to the increasing mortgage rates, which have been growing higher and higher since January, as well as to the dearth of real estates for sale. According to Warren, the ‘feeding frenzy’ had a psychological impact and a put-off effect on the buyers who were unsuccessful in acquiring homes a couple of times while the prices were going up.
Statistics from the government owned company for mortgage finance showed that the mortgage rate in the USA in December was 4.46% on the average, which was 1.11% higher than December 2012. Moreover, with the stabilization of the economy, these rates are expected to rise even more and more. The latest development on the topic is that the Federal Reserve is planning to cut the monthly purchases of mortgage-backed and government securities, which they did in order to lower the interest rates in the long run. Originally, they spent $85 billion a month, which was cut to $75 billion in December and will soon become $65 billion.
According to some specialists, however, the increase of the mortgage rates may result in higher market activity as some buyers will hope to sign before the rates are too high while the home-owners will be encouraged to meet the need. According to Dukakis Center for Urban and Regional Policy, some sellers, including baby boomers who are looking for downsize and couples who are ready to move to bigger homes, may decide that now is the perfect time to get the best prices. The demand is still strong and the sales could have been stronger if there are more homes available for sale this year.
If there is more supply, the price rise may be slowed down, as it has been particularly increasing because of the competition between bidders who wanted to get homes in preferred areas like Boston, Newton and Brookline. It seems, however, that not all the areas in Massachusetts have experienced increase in sales, as buyers now are apparently looking for homes with mass transit options or at a small driving distance from Boston.