Boston’s real estate market has achieved record breaking growth over the past decade. Thanks to a shortage of for-sale properties and a growing population, Boston real estate prices have more than doubled since 2011. Now, with a recession looming and interest rates on the rise, many are predicting that Boston real estate prices will begin to decline soon.
Based on the most recent MLS data, it does appear that real estate prices will soon begin to decline in Boston. Here are the reasons why:
1. Total Real Estate Sales are Down in Boston
Last month, there were 673 total property sales in the city of Boston. Compared to July 2021 (853), total home sales are down -21.1% year-over-year. It appears that homebuyer demand is beginning to wane in the face of rampant inflation and rising interest rates. When demand drops, supply typically begins to rise and prices come down.
2. Home Price Growth Is Decelerating in Boston
The current median sale price in Boston is $816K for single family homes and $730K for condos. Each has increased by +4.46% and +4.32% since January 1 respectively. Compared to a year ago, those prices are up +8.13% for single family units and +7.39% for condos. This shows that price growth has slowed down in this year, indicating that demand may be waning.
3. More Interest Rate Hikes to Come
The Fed is still planning on raising interest rates before the end of the year according to their most recent meeting. We’ve seen 3 rate hikes so far in 2022, and inflation has yet to stabilize itself as a result, meaning there will likely be more to come. This will further hinder demand as we enter the slowest quarter historically for the Boston housing market, Q4.
Based on these 3 reasons, look for Boston’s median sale price to begin to plateau in September and October. Prices will likely begin to trend downwards in November and December of this year. We do not expect to see a large decline in home prices in Boston long term however. The city has added so many new jobs in the medical and biotech spaces that the city is in a good economic position beyond the recession. For now, let’s just enjoy the fact that the market may actually soften for buyers in the short run!