Massachusetts homebuyers hope mortgage rates ease, inventory loosens in 2025. Will they?

Yahoo

15-02-2025

Real estate experts say prospective homebuyers could catch a slight break in 2025 as inventories marginally increase, but demand will still remain high for single-family homes.
Through the first 11 months of 2024, the total number of single-family homes sold in Massachusetts totaled 34,784, a 1.6% increase from the previous year's historically low sales, according to The Warren Group, a Peabody-based provider of banking and real estate data. But last year's statewide median sales price through Nov. 30 was $616,925, up a robust 8.2%
Mortgage rates declined during the fall, which helped prospective buyers. But the average 30-year mortgage rate has since moved up, from a little over 6% in September to closer to 7% today.
According to Nicole Rideout Hartwick, president of Gibson Sotheby's International Realty, 2025 will bring an early and busy spring market.
'Almost 80% of buyers were sidelined in the fall across all price points due to the election, as well as the perception that interest rates would improve in the spring,' she said. 'This will bring that much more demand and competition to the market.'
Sales of high-end properties — those selling for $3 million or more — softened in the fall with the election, Hartwick said, but that's typical.
'We expect to see that come back in early spring," she said. "New construction can't be built fast enough for demand and that will continue to rise. Newer construction priced below $1.5 million is in huge demand, as the largest group of millennials enters their prime homebuying years.'
Stewart Young, principal and luxury real estate agent at LandVest, agrees there seems to be a lack of new construction, despite demand for it. He said all markets — luxury homes, new construction, smaller homes and condominiums — are on the rise.
'Since 2021, high-end inventories and sales have been increasing with record levels in many New England markets,' Young said. 'I expect these trends to continue.'
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And while there's a preference for turnkey properties requiring minimal cosmetic upgrades, savvy buyers also see opportunity in buying fixer-uppers, he said.
'Buyers continue to value good schools, access to amenities and reasonable commuting,' Young said.
Hartwick and Young both said suburban markets have been extremely competitive, with record sales prices.
'Within these towns, there is a definite preference to be in the town or village center vs. out in the country,' Young said. 'Likewise, in cities and larger towns there is a trend toward being able to walk to amenities.'
The Boston market has remained steady and healthy, Hartwick added.
Hartwick thinks interest rates will become more favorable in 2025.
'They are predicted to drop to high 5% and low 6% by the end of 2025, which will make a difference for a lot of buyers,' she said.
Young was more cautious in his outlook.
'There are so many factors that will be in play with the new administration,' he said, in reference to Donald Trump's return to the presidency. 'I wouldn't expect a return to the record low rates of a few years ago. While financing is less of a concern in the high-end market, generally high interest rates are an obstacle for buyers.'
Kim Williams, a Realtor with Gibson Sotheby's International Realty in Westwood, said the biggest obstacle for buyers remains low housing inventory, especially for first-timers.
'Hopefully, providing opportunities for existing homeowners to downsize will stimulate some additional housing options for first time buyers,' she said.
Hartwick thinks the Greater Boston housing market will be steady and competitive across all markets and price ranges.
'Sales are expected to increase 5% to 8% nationally, and inventory is also projected to increase slightly,' she said. '2025 will bring opportunity for buyers and sellers alike, but preparation and proper representation are key, as the market will remain very competitive.'
Buyers will benefit from increasing inventories, suggesting a more balanced market, but demand continues to outstrip supply, so sellers will still have the advantage, Young said.
Climate change-type risks, particularly sea level rise, ocean storm surge and inland storm-related flooding, are increasing concerns for real estate owners and buyers, he added.
'Insurance costs are increasing, and coverage is decreasing or not available at all in high-risk markets," Young said. "Recent hurricanes in Florida are likely to increase these concerns. Buyers will benefit from improving inventories and will find exceptional deals for high-risk properties.'
On the other hand, demand still outstrips supply, he said.
'Owners of high-risk properties will be wise to engage engineers to conduct climate risk assessments and develop preventive measures,' Young said.
This article originally appeared on wickedlocal.com: Greater Boston real estate experts cautiously optimistic about 2025