Why Has The Market Slowed Down?
Over the past six years, the Boston real estate market has been booming. We’ve seen incredible growth year after year.
Upon hitting the market, properties sold in a matter of days, and sometimes even hours - with multiple offers. Buyers were offering more than asking price and waiving both inspection and financing contingencies. All in hopes of snagging a house in a competitive market.
So what has changed and why the slowdown?
There are four key factors in play here. Take a look to learn more:
1. Dramatic price increases are not sustainable
Buyers increasingly became fed up with the extreme competition and considered other options: renting, staying in their current home and renovating, or considering other locations altogether.
2. Home prices have grown much faster than wages
Buyers ultimately decide what homes are worth. This means that home prices in any given location are ultimately tied to the income of the people who either live there or want to reside there. Over the past six years, however, the relationship between true affordability and home prices have come undone. It has reached a breaking point and buyers are unwilling to pay what sellers are asking.
3. Interest rates are on the rise
Rising home prices were aided by low mortgage rates for years. This put more expensive homes within reach for many buyers. But that era is now coming to an end. Buyers have to absorb the impact of rising rates and, in turn, are not willing to shell out as much money to purchase homes.
The rise of interest rates, combined with high real estate prices, also causes many people to stay put and renovate rather than trade up.
4. New tax law
The new tax code reduces incentives for homeownership. Why? It blunts the advantage of the mortgage-interest deduction and caps the deduction for state and local taxes. This combination diminishes the financial perks of homeownership and affects what a buyer can afford to purchase.
What does this mean for you?
Rising mortgage rates, high home prices, low real estate inventory and the new tax law have all impacted the housing market and buyer behavior this year.
What are you to do? If you’re in the market for a new house, now is a great time to jump into the real estate market - there is less competition and more time to make decisions.
And, don’t get discouraged. There are still plenty of homes available and the playing field is leveling out.
If you’re a seller, it’s still a great time to sell. You will reap the benefits of the rising prices over the past six years. While your house may not necessarily sell in just one day, there are plenty of buyers looking for homes like yours. It’s just a matter of figuring out the best sales price and a winning formula to get buyers in the door.