For Aaron Berdofe and his family, the timing was right to find a new home.
After his father’s death in February, they needed more room for Berdofe’s mother to stay on long visits from her place in Iowa, where she’s now alone. And with all the headlines lately trumpeting declining home prices, it seemed like a good time to buy.
Even as home prices start to edge down, there’s still next to nothing available in Swampscott, where they currently live in a three-bedroom, and what they have found has been way too expensive.
“In healthy housing markets, you’re supposed to be able to just find another house, right?” said Berdofe, who wants to stay in Swampscott because his two young children have friends in the neighborhood. “There are a million reasons why that’s not the case for us right now. And I don’t know whether to wait or keep moving on this because both options feel like the wrong choice.”
Indeed, after a frenzied run-up in demand and prices during the pandemic, Greater Boston’s housing market is slowing down. That means home buyers have a little bit more power for the first time in a long time. Houses are staying on the market longer, and they’re selling for a little less.
But the same dynamics that have begun to shift the market — rising mortgage rates, inflation, and a stark supply shortage — have pushed housing even further out of reach for many, with some measures of affordability hitting their lowest point in over 30 years.
“There are a good number of buyers who are looking at what it costs to buy a house in Greater Boston, and looking at what they’re going to be paying for a monthly mortgage, and throwing up their hands,” said Dawn Ruffini, president of the Massachusetts Realtors Association. “In a lot of cases, if people don’t absolutely need to buy a house right now, they’re not going to.”
And while Boston has long been a tough market for buyers, it is also, suddenly, a tough market for sellers too.
After years of watching neighbors be able to set their price, would-be sellers today face softer demand. Many are paying lower interest rates than they’d probably get on their next home purchase. That has some people reconsidering whether now is really the time to sell.
“It’s almost a bit of a stalemate,” said Adam Guren, an associate professor of economics at Boston University. “You have a bunch of buyers rushing out, but it’s not like the sellers are rushing in. The time for that was a few months ago. It makes for a market where things are just slow across the board.”
Much of the quick shift in the market is driven by mortgage rates, which on Thursday hit an average of 6.29 percent, more than double what they were a year ago and the highest since 2008. Last week’s Federal Reserve rate hike, and warnings of more to follow, will probably trickle into mortgage markets and drive borrowing costs upward for the foreseeable future.
That has smothered demand, and sent once-roaring housing markets across the United States onto the brink of decline.
Home sales have fallen nationally for seven straight months, the National Association of Realtors said last week. Some economists are projecting double-digit percentage price declines over the next few years — perhaps of even 15 to 20 percent — in markets where homes have become significantly overvalued and demand has dropped off.
“What goes up must come down,” said Cris deRitis, the deputy chief economist at Moody’s Analytics. “We had a lot of demand — it felt like people were willing to offer up their newborn to secure an offer — that was driving home prices up. The Fed has really pushed that demand down, and we’re going to see those prices drop off accordingly.”
Last week, Moody’s estimated that homes in Greater Boston are around 20 percent “overvalued,” just below the national average. That would portend a price decline somewhere between 5 and 10 percent through early 2024, deRitis said.
Prices have ticked down the last two months — as is typical this time of year after peaking in June — with the Greater Boston Association of Realtors reporting its median price for a single-family home at $825,000 in August. That’s down 1.8 percent from July but still 6 percent higher than the same month last year.
Mary Gillach, a realtor with William Raveis based in Chestnut Hill, said she has already seen softening demand firsthand in the Boston area. Earlier this month, she held open houses that had no attendees, for the first time since the market took off during the pandemic.
“It’s hard to predict,” Gillach said, “but I suspect we’ll start seeing more of that.”
Still, Boston’s housing market has long been less boom-and-bust than many places, and some experts believe any price declines will be modest at worst.
A big reason why? The region’s housing shortage. With little supply on the market and new construction sparse, prices only have so much room to drop. Not to mention the fact that many developers are slowing new projects because construction costs are sky high.
“The concern here is that there’s very little supply entering the market,” said Guren, the BU economist. “That’s going to keep home prices relatively high.”
That is bad news for all involved, but especially for buyers. They are still facing a high sticker price, and tough monthly payments that could extend the hurt for years to come.
And it leaves people like Berdofe and his wife in a tough spot. They refinanced their mortgage earlier this year and secured a 2.6 percent fixed rate, “about the best anyone could hope for,” he said. Not only would a new home come with a higher sticker price, but Berdofe estimates their monthly mortgage payment would roughly double if they had to pay the 6 percent rate many new buyers are shouldering. Still, given the upward trajectory of the last decade of Boston’s housing market, he’s not optimistic it’ll get much easier anytime soon.
“The whole situation is a mess,” said Berdofe. “I don’t want to pay a higher rate, but I just know that the longer we wait, the more we’re going to end up paying in the long term.”