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Home Buying
Unabated demand, high mortgage rates, and low inventory will continue, but is relief in sight?
Experts agree: The 2024 housing market in Greater Boston is going to look a lot like 2023.
Low inventory and steady demand will keep costs high, but even if rates dip as expected, home prices are expected to rise — though only moderately.
David McCarthy, 2023 president of the Massachusetts Association of Realtors, said the commitment to build more homes in MBTA-served communities is a step in the right direction and will help increase inventory over time.
But demand is demand. In the short term, McCarthy said, even today’s high interest rates won’t deter buyers from pursuing the properties they really want. If it’s “the right product at the right location and at the right price — it will move,” he said.
The ones in demand tend “to be move-in ready homes,” he added. “They’re recently renovated or totally renovated or new construction, not just a new kitchen 20 years ago.”
Shant Banosian, a mortgage loan originator for Guaranteed Rate, said the market is suffering from “rate lock,” when owners with very low mortgage rates decide not to move because it would mean taking on a new loan at a higher cost.
But mortgage rates are expected to fall in 2024.
“This year started off with rates at 6.5 [percent] going all the way up to 8 percent. We’re hovering in the low sevens right now,” Banosian said. “I think that based on the data that’s come out, the Fed is likely done hiking rates. And it seems like the consensus is … we’re going to see two to three rate cuts next year. If I was to give you a range, I’d say mortgage rates could wind up between 5.875 and 6.875 percent by the end of 2024.”
He also suggested that home price appreciation would be between 2 and 5 percent next year and that luxury home buyers may get a little relief: Jumbo loan rates — which have been very close to the 30-year fixed this year — may fall.
“I think what’ll happen is when the market normalizes again, jumbo lending will come back where it’s more aggressive in terms of rates and products than it was this year,” Banosian said. “So I think you’ll see the high-end market pick up a little bit in 2024.”
Lack of inventory mires market
Everyone interviewed for this story said increasing housing production is critical to resolving Greater Boston’s housing crisis.
Jeffrey Brem, 2023 president of Home Builders & Remodelers Association of Massachusetts, said making accessory dwelling units or in-law apartments legal statewide would be a fast and easy way to create affordable housing.
“The governor’s bond bill talks about ADUs and creating a system for them to be approved statewide without requiring special permits,” Brem said. “How much that is going to free up market-rate housing, we’re not sure yet. [But] anything to help the production of housing is a good thing.”
The new MBTA Communities Act, and a few other bills currently before the Legislature, will boost the housing supply, he said, but not in 2024.
Mounzer Aylouche, MassHousing’s vice president of homeownership programs, said he expects his business to decrease in 2024 — not because there aren’t enough buyers, but because there won’t be enough houses for sale.
“You know, demand is still high, but home sales are very low,” Aylouche said. “In 2023, with the strength of the MassDREAMS program — which gave us a tremendous boost in terms of volume — we were close to $730 million in volume. I’m projecting $500 million in 2024 in the hope that we will see some type of MassDREAMS funding.”
According to the MassHousing website, MassDREAMS provides down payment and closing cost grants to first-time home buyers who meet the program’s eligibility criteria and who live in one of the 29 communities disproportionately affected by the COVID-19 pandemic: Attleboro, Barnstable, Boston, Brockton, Chelsea, Chicopee, Everett, Fall River, Fitchburg, Framingham, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Randolph, Revere, Salem, Springfield, Taunton, Westfield, and Worcester. The money came from the American Rescue Plan Act.
Home sales were down more than 10 percent year over year in Greater Boston in November, according to a report The Warren Group released Dec. 19. Meanwhile, the median sales price for a condo in the region slipped a negligible 0.9 percent to $550,000, and the median cost of a single-family home rose 6.9 percent to $700,000.
‘Huge demand’ in rental market
Demetrios Salpoglou, CEO of the online real estate marketplace Boston Pads, said Greater Boston’s tight rental market is going to get even tighter in 2024.
“We’ve already seen huge demand,” Salpoglou said, “and we’ve already rented properties for June and September 2024. It’s been a robust market. The vacancy rate in the city of Boston is 0.65 percent — under 1 percent. A healthy vacancy rate, like where renters can wheel and deal, is around 6 percent.”
As home sales decline, he said, prospective buyers become or remain renters, increasing the number of people looking for apartments and driving rents up. A Dec. 11 report from RentCafe suggested that 13 people on average are vying for every vacant apartment in Greater Boston. That number jumps to 17 people in Providence and 20 in Portland, Maine.
A November analysis by ApartmentAdvisor, an online marketplace, ranked Boston as the third most expensive renters market in the country, with a median rent of $3,000 for a one-bedroom unit. Boston has set up camp in this position. In November, only New York City and Jersey City ranked higher for costs.
Jumping into the fray
Amy Wallick, the incoming president of the Massachusetts Association of Realtors, said buyers are going to have to do their homework and understand their goals if they want to get into a home in 2024.
“They’ll want to work with their agents and make sure that they’re making very informed decisions,” Wallick said. “And when they’re in those pressure situations, they should not let the pressure drive that purchase. Many people have trouble responding to the pressure, especially if they’ve missed out on a few homes.
”The right house for a buyer always comes along. … Sometimes it just takes a few extra offers to get there.”
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This article was originally published by a www.boston.com . Read the Original article here. .