Professional Insights: Home Prices Headed Higher
In 2021, we saw a great increase in the Metrowest Boston home sale prices — up 26.5 percent in some towns. In spring 2022, while some buyers were hoping for a recession and for prices to decline, other buyers were out buying at full force and taking advantage of low interest rates, driving up prices once again, with multiple offers ranging from $200,000 to $400,000 over the asking price on many homes.
The inflation rate was out of control at 9 percent. The Federal Reserve’s goal was to raise the federal funds rate gradually to get above the inflation rate and get consumers to stop buying to bring down the inflation rate to 2 percent. In one year, the Fed raised it from 0.25 percent to 4.75 percent as of February 2023. As a result, banks also increased mortgage interest rates from about 3 percent in May to about 6.5 percent last year. Buyer activity slowed to a halt and homes started to sit on the market. Homeowners needing to sell dropped their prices to try to motivate buyers to act. The Fed’s strategy has been successful thus far, as the inflation rate quickly dropped from 9 percent in May to 6 percent in December. Currently, mortgage interest rates dropped and are at about 5.75 percent.
In January 2023, we started seeing a frenzy of buyers coming out. New buyers are entering the market, and existing shoppers are getting more acclimated with the current interest rates. Consumer confidence is increasing to the point where buyers are financing with 3/1, 5/1 and 10/1 adjustable-rate mortgages (ARMs) at reduced rates, betting/hoping that the rates will come down before their interest rate locks expire. A home at 5 Turnbridge Lane in Hopkinton welcomed over 75 parties for a viewing. Once again, when homes are priced right, we are seeing multiple offers and the houses flying off the market.
Low inventory and high demand equals multiple offers and home prices heading up. This spring market, expect home sales prices to increase over last year. We are in an eight-year housing shortage. Combine that with record high rent prices and continuous relocation, and more buyers are entering the home buying market. National Association of Realtors (NAR) economist Lawrence Yun predicts that in 2023, home prices will increase 5 percent, while Realtor.com is more optimistic, predicting a 10 percent increase in home values over 2022.
Spring homes coming to market that are priced right once again are receiving lines at the open house doors and selling over asking, which is a sign that we will have an exceptional spring market. Are you ready?
Contact Kim Foemmel at Foemmel Fine Homes to find out what your home is worth!
Foemmel Fine Homes
1 Lumber Street, Suite 207C