Boston’s real estate market got off to a sluggish start in 2024. Total Boston real estate sales are down -10.62% compared to 2023 and down -33.75% compared to 2022 on account of rising interest rates. Still, with housing inventory so low, median sale prices for all property types are up +9.81% in March year-over-year and showing little signs of going down. Here are the trends affecting the real estate sales market in Boston.
Boston Real Estate Sales Continue To Drop
The city of Boston recorded 850 total residential property transactions through Q1 2024. Compared to 951 sales in Q1 2023 and 1,283 in Q1 2022, we’re seeing a sharp drop in total real estate deals in direct correlation with the Fed’s recent interest rate hikes. Numerous talking heads and pundits are predicting that interest rates will drop as we head towards the late summer and fall of 2024. After all, it is an election year and we keep hearing the word “recession” over and over even though we are not seeing big job losses in Boston-- Yet. Clearly there is some pent up demand with people wanting to move but no one wants to give up their incredibly low locked in interest rates that they currently enjoy. Should interest rates fall by two or three points it should spur more inventory and corresponding demand. Right now it is simply a waiting game with frozen and stalled marketplaces in nearly every sector of real estate. Look for 2024 transaction numbers to remain below what we’ve seen over the past 5 years in Boston’s real estate market unless dramatic changes occur.
Real Estate Inventory Continues to Drop in Boston
Boston ended the month with a total of 1,162 property listings on market for sale. That is a 4.2% drop from March’s 2023 inventory of 1,213. With the exception of March 2020 which was marked by COVID, inventory has been slowly declining year-over-year since 2019. This can be attributed to the City’s inability to produce new construction inventory to keep pace with rising demand in Boston. Of course, when supply is constricted, prices will rise, which is exactly what we’re seeing in Boston’s real estate market over the same time span. Nothing can escape the invisible hand of supply and demand. No one can avoid the fundamental truth of supply and demand. We are going to have to rethink making it far easier for free market forces to produce greater supply in a far shorter period of time. Any and all new zoning approaches and ideas must be given an opportunity to perform. Until we vigorously attack the supply problem; our demand problem will keep prices higher.
Boston Median Sales Price Near All Time High
The median sale price for all property types in Boston was $871,267 last month. That represents a +9.54% increase in median sales price compared to March 2023, and falls just short of the all-time high 30 day median sale price of $876,091 in Boston set in April 2022. Considering the high-demand season is still in front of us in 2024, it is possible for that record to be broken in Boston over the next few months. However; recently we have been seeing interest rates going up again and that can dampen any future price increases. It is going to be an interesting Spring and Summer.
Interestingly, price per square foot for Boston properties has remained level throughout much of the last two years. Last month’s price per square foot of $757 is up +4.85% from a year ago and has been fluctuating between $700 and $800 throughout most of the past 24 months.
Boston Q2 2024 Real Estate Sales Market Forecast
Looking ahead towards Q2 2024, it is a fair and reasonable expectation that total real estate sales will continue to lag behind previous years numbers. April through June is historically the busiest quarter of the year for the Boston real estate market, and that will likely hold true this year, albeit with lower numbers than we’ve seen in years past.
With real estate inventory remaining low, look for real estate prices to remain high although they could possibly stall over the next few months as interest rates have been threatening to climb. Once the market hits its annual down-cycle in late Q3/Q4, prices will likely level off. There is always the real possibility that a recession could hit and this could stimulate interest rates to go down which could change the equation. To move the needle in a significant way it would seem we would need at least a 3% lowering of interest rates to unfreeze the marketplace. We do believe that if we keep limping along in our current stalled housing dilemma that the median sale price will hit an all-time high next quarter and perhaps break the $900,000 barrier for the first time in history. It is somewhat of a tricky year to make big predictions because we do have a looming national election coming up which can often add noise to the business equation.
In order to truly combat soaring real estate prices, we’ll need an injection of new inventory into the market to offset the high demand for real estate. The City of Boston must get to work green-lighting new construction projects and make it easier for developers to continue to build in Boston. Developers should be more vocal about asking government to reduce or temporarily eliminate affordability requirements in all permitted deals. Right now with the high cost of labor, borrowing and materials it is nearly impossible for developers to make a profit. Capital and talent is moving to more business friendly environments and our elected officials should get a better grasp on the current market conditions and provide incentives to get supply going across Greater Boston.
We will continue to monitor Boston’s real estate sales market as these trends develop.
Demetrios Salpoglou
Published April 22, 2024
Demetrios has pulled together the largest apartment leasing team in the Greater Boston Area and is responsible for procuring more apartment rentals than anyone in New England – with over 130k people finding their housing through his services. Demetrios is an avid real estate developer, peak performance trainer, educator, guest lecturer and motivational speaker.
