As 2023 draws to a close, real estate prices continue to rise, following the trends of the past few years. And real estate industry experts say it’s not going to decline anytime soon.
In Massachusetts, state officials say up to 200,000 new housing units are needed to address the commonwealth’s ongoing housing crisis, but the lack of supply means soaring prices for homebuyers and renters. This is the main cause.
The state has been fighting to produce more housing to reach that number, but progress on this front has been slow.
“We’ve just had a huge shortage of inventory over the last few years,” said Amy Warwick, 2024 president of the Massachusetts Association of Realtors, adding that inventory is currently the industry’s biggest hurdle. “We are seeing prices remain strong as we close out 23 years due to a lack of supply and demand.”
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The median sales price for single-family homes in Massachusetts rose 10% to $605,000 between November 2022 and November 2023, and condos rose 4% to $510,000, according to MAR data. It came to $5,000.
During the same period, the number of new properties decreased by 0.3% for single-family homes and by 2.7% for condominiums.
The most significant price changes were in southeastern and central Massachusetts, where median sales prices for single-family homes rose 13.3% and 13.6%, respectively.
In November 2023, the number of contracts for single-family homes was 3,238, down 11.2% from the previous year, and the number of contracts for condominiums was 1,317, down 9%.
Things don’t look much better for renters. The median rent for a one-bedroom apartment in Massachusetts in November was $2,255, slightly up from the median price of $2,228 in November 2022, according to rental platform Zumper.
In Boston, that number was even higher at $2,990 last month, making it the third most expensive city in the country to rent.
Compounding the supply and demand problem are high mortgage rates, with average rates in the 6% to 7% range.
Warrick said those rates are expected to fall slightly in early 2024, which could help homebuyers.
“You can’t see them in a couple of conditions like you used to,” she said. “But even if we get close to that… it’s a 5 to 6 (percentage) window as opposed to a 6.5 to 7.5 window.” [percent] That will affect affordability. ”
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Mr Warwick said prices were likely to remain firm throughout next year despite changes in interest rates. There is usually more inventory on the market after the holidays, but not enough to make a big difference.
The state has implemented multiple programs to increase housing production, including requiring towns with MBTA stations to allow multifamily housing to be built near them and creating affordable housing. This includes funding development.
In October, Gov. Maura Healey introduced a $4.12 billion bond measure that, if passed, is expected to create 40,000 new housing units.
In a year-end interview with MassLive, Mr Healy said addressing the housing crisis was a “top priority”.
“I think the key is supply…this is why I’m so focused on production through new units. [the] Refurbishment [or] It’s a rehabilitation of an existing unit,” Mr Healy said. “That’s why we proposed [accessory dwelling units] That’s right…this is one of the easiest ways to create a house or many houses. So these are all things we need to do.
“If production increases and supply increases, rents will go down,” she continued. “But I understand and I feel the pain that people who are trying to rent and people who are trying to buy a home are feeling. And you know, this is a top priority for our administration. The reason is.”
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However, these homes don’t emerge overnight, so it may take some time for them to have an impact on prices.
“The reality here in Massachusetts is that there is a housing shortage. So as long as demand is strong, supply does not support demand,” Warrick said. “It must be a serious inventory influx, but I don’t think that’s necessarily achievable.”