How’s the Market? In a Word, Mixed

Let’s recap. From the start of the lock-down in 2020, the real estate industry began charting unknown waters. We saw second-home markets experience unprecedented activity. The pace of Boston’s real estate slowed down. And buyer demand in suburban markets created a frenzy like none we’ve seen before.

Then things began to change towards the end of last year. As interest rates soared, buyer demand slowed considerably and transactional volume was down across all markets.

But at the start of 2023, conditions changed yet again. Lenders became creative in response to the interest rate climb, and incentives for first-time home buyers began rolling out weekly. It was a smart move to target first-time home buyers, because while more seasoned real estate owners were unlikely to upgrade to new homes (and give up interest rates often less than 3%), current renters were more immune to the rate hikes. These lender incentives not only had the desired effect of prompting new buyers to continue home-searching; they also served to increase buyer demand overall.

So what’s going on now? In particular, a return to last spring’s frenzied activity, especially in the suburban markets and for properties below $1M. Low inventory remains a challenge across all markets and helps keep the pace brisk.

Yet at the same time, homes at higher price points are seeing buyers more sensitive to pricing than before, and taking advantage of the upper hand for the first time in a while. This means more offer negotiation, with home inspection and financing contingencies making a comeback. In fact, we’re seeing something interesting: Buyers are simply less emotional these days about walking away from transactions if they don’t get the price and terms they want.

Of course, the market depends, as always, on where you look. Price points, neighborhoods and micro markets will always reflect different nuances and different conditions.

Overall, though, we feel a general return to normalcy in market activity. There’s a noticeable reset and return from the “abnormality” of activity induced by lock-downs, hybrid work cultures and the COVID clamor for extra room and outdoor space.