What’s Behind Falling Home Sales in Massachusetts?

Given the headlines in the media about falling Massachusetts home sales, prospective home buyers might get the impression it’s now a buyer’s real estate market in the spring of 2023. It’s not. 

According to data compiled by the Massachusetts Association of Realtors (MAR), Massachusetts single-family home sales fell 15 percent in 2022 and plummeted 23 percent in the first quarter of 2023. In March, house sales declined 16 percent.

Condominium sales dropped 20 percent in 2022 and plummeted 21 percent in the first quarter. In March, condo sales declined 20 percent.

The decline in home sales isn’t from a lack of demand. In fact, many homes in good shape in desirable locations get multiple offers, sometimes more than 10 or 20.

The reason for fewer sales is simple. There are fewer homes to buy.

Real estate inventory has been falling for years, long before the start of the pandemic. Pandemic-fueled demand and historically low mortgage interest rates certainly accelerated the decline. In March 2015, there were nearly 18,000 single-family homes for sale statewide. Fast forward to March 2023, and home buyers had just over 4,000 houses to consider. Compared to March 2022, single-family inventory dropped 16 percent.

The supply situation for condominiums is similar. In 2015, nearly 5,000 condo units were available, but less than 2,500 in March 2023. Compared to March 2022, condominium inventory fell 18 percent.

About six months of inventory is considered a balanced market between home buyers and sellers. Statewide, there was about one month of single-family homes supply in March, meaning the housing stock would run out in four weeks based on the current sales pace without new listings. There were about six weeks of condos available.

Related: Is There a Right Way to Buy a Home?

Unless home buyer demand dramatically diminishes, the supply shortage likely won’t improve much in 2023. There were 4,221 new single-family listings in March, a 23 percent decline from 5,458 in March 2022. In the first quarter, new listings fell 18 percent year over. New Condominium listings decreased 25 percent in March and 20 percent during the first three months of 2023.

Home-buying demand did ease in the fall of 2022 after mortgage interest rates spiked to more than 7 percent for some prospective homebuyers. There was a short window of opportunity from about late summer through late fall when there was less competition for homes. That window slammed shut when interest rates trended downward in late 2022 and early 2023. 

Home Prices Remain Strong

It’s not surprising that scant inventory and multiple offers have resulted in higher prices; however, interest rates that are more than double pandemic lows have slowed the home price increases.

MAR reported the median price of single-family homes increased 3 percent to $556,000 compared to $550,000 in March 2023. The median house price rose 2 percent in the first quarter to $535,000 from $525,000 year over year.

Condominium price growth has been more robust in 2023, rising 7 percent in March and 8 percent during the first three months.