Massachusetts housing market continues to cool, prices and sales slip substantially

As the Fed continues to hike interest rates, the Massachusetts housing market kept rapidly cooling through October, according to newly released Massachusetts Association of Realtors reports.

Single family home sales plummeted 22% for the month compared to October 2021, the reports detailed, while prices took a steeper 4% tumble from September.

“The biggest takeaway for me was we were actually down across the board on pending sales, price and new listings,” said MAR President Dawn Ruffini. “And the decrease in the price month-over-month was more significant than I expected.”

Prices have been on a modest downward trend since summer, going from the $626,000 median single-family home price peak in June to $547,000 last month.

Though prices are still up year-over-year, the rate of growth was substantially slower for October.

“The interest rate has basically doubled since summertime,” Ruffini said. “And on top of that, you have a lot more of the inflationary pieces starting to hit people. Those coupled together are what’s driving the drop in median price. But at the same time, what’s holding the median price as high as it is, is the fact that we have such low housing supply here in Massachusetts.”

The Federal Reserve raised interest rates by a record-setting, fourth-consecutive .75 point jump in November.

Recent inflation reports have been surprisingly positive, with government officials announcing an easing in wholesale price growth in October — 8% year-over-year — on Tuesday.

Ruffini called the Fed’s interest rate options a “double-edged sword.”

“If they hold the rate where it is, we’ll be okay and the market will still continue to try to correct itself,” said Ruffini. “If they decrease the rate and the mortgage rates drop below 5%, I think we’ll probably see that market pick up again and the median price start to climb.”

After the Nov. 2 rate hike, Fed chair Jerome Powell said though interest rate hikes may slow, they will likely continue for longer than previously expected and the inflation fight is “far from over.”

Pending single family home sales also fell 10.2% year-over-year and homes for sale decreased 16.1%.

October’s reports also marked notable shifts in the market. Condo sales, which stayed high through the summer as a more affordable option, took a dive as prices for homes fell.

Though multi-family home sales fell more significantly, 32.2% compared to last October, Ruffini added the market may be shifting in that direction

“From what I’m hearing at least on the street — that may not be as reflective of the numbers yet — is there are more buyers starting to look at multi-families as opposed to single family homes because it helps them to get into a property and have a rental income,” Ruffini said.

Though the housing market may not quite be smooth sailing yet, Ruffini recommended to using local realtors and lenders to get a sense of the local loan programs and market nuances.