As 2023 comes to a close, real estate prices have continued to climb, following trends from the last few years. And they’re not coming down anytime soon, according to experts in the real estate industry.
In Massachusetts, where state officials have said up to 200,000 new housing units are needed to address the commonwealth’s ongoing housing crisis, the lack of supply has been a major contributor to high prices for homebuyers and renters.
The state has fought to produce more housing to reach that number, but progress has been slow on that front.
“Over the last few years, we just have a substantial shortage of inventory,” Amy Wallick, the 2024 president of the Massachusetts Association of Realtors, said, adding that inventory is currently the industry’s biggest obstacle. “With the demand and lack of supply, that’s where we’re seeing these prices still remaining strong even right now, as we close out ‘23.”
According to MAR data, the median sales price for a single-family home in Massachusetts increased by 10% to $605,000 between November 2022 to November 2023, and increased by 4% to $515,000 for condominiums.
In that same period, new listings decreased by 0.3% for single-family homes and by 2.7% for condominiums.
The price changes were most dramatic in southeast and Central Massachusetts, where the median sales price for a single-family home went up by 13.3% and 13.6%, respectively.
In November 2023, there were 3,238 closed sales for single-family homes, down by 11.2% from last year, and 1,317 closed sales on condominiums, a 9% decrease.
Things didn’t look much better for renters: according to rental platform Zumper, the median rent for a one-bedroom apartment in Massachusetts was $2,255 in November, a slight increase over the median $2,228 in November 2022.
In Boston, that number was even higher at $2,990 last month, making it the third most-expensive city for renters in the country.
Exacerbating the supply-and-demand problem are high mortgage interest rates, with averages in the 6% to 7% range.
Wallick said those interest rates are expected to come down slightly in early 2024, which could help homebuyers.
“We’re not going to see them where they were previously, down in the twos and threes,” she said. “But even if we get down closer to that … five to six (percent) window as opposed to the six-and-a-half to seven-and-a-half [percent] range, that will impact that affordability.”
Despite any changes in interest rates, Wallick said prices will likely remain strong through the coming year. While more inventory usually comes on the market after the holidays, it won’t be enough to significantly change the situation.
The state has implemented multiple programs to increase housing production, including requiring towns with MBTA stations to allow multifamily housing near them and providing funding for affordable housing developments.
In October, Gov. Maura Healey filed a $4.12 billion bond bill that is expected to create 40,000 new housing units if passed.
In a year-end interview with MassLive, Healey said addressing the housing crisis is a “top priority.”
“I think the key is supply … This is why I’m so big-time focused on production, whether it’s through new units, or [the] renovation [or] rehabilitation of existing units,” Healey said. “It’s why we proposed [accessory dwelling units] by right … it’s one of the quickest ways to create housing and a lot of housing. So these are all things that we need to do.
“And with more production, with more supply out there, rents are going to go down,” she continued. “But you know, I understand and I feel the pain that people who are trying to rent feel, that people who are trying to buy homes feel. And you know, this is why … it’s a top priority for our administration.”
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However, those homes will not be created overnight, so it may be a while before they affect prices.
“The reality here in Massachusetts, we have a housing shortage. So as long as the demand remains strong … the supply just doesn’t substantiate the demand,” Wallick said. “It would have to be a serious influx of inventory, which I don’t necessarily think is achievable.”
