The Greater Boston housing market is buzzing with anticipation as we delve into the first market update of 2024. Big-time investor Meredith Whitney has caught our attention with her unique prediction about a potential decline in real estate prices. But hold on, it’s not for the reasons you might assume.
Whitney is sounding the alarm about a phenomenon she calls the “Silver Tsunami” poised to hit the real estate market. What does that mean? Brace yourselves – 10,000 Americans per day are hitting the age of 65 until 2030. According to AARP, a staggering 51% of people over 50 have downsized their homes, leaving the remaining 50% in possession of around 30 million homes. Why does this matter? Because retirement at 65 often prompts lifestyle changes – from traveling more to moving closer to family or seeking warmer climates.
Whitney’s bold prediction is that this demographic shift will flood the market with homes, creating an excess supply. Couple that with the current relatively high mortgage rates, and she foresees a situation where demand falls short, causing a decline in prices.
While Whitney’s scenario may be plausible, the local Greater Boston area might not witness a drastic impact in 2024. The pent-up demand, especially in the real estate hotbed of Greater Boston, combined with mid to high 6% mortgage rates, could absorb the potential surge in homes hitting the market. Last year marked the lowest number of homes sold in the past 18 years, creating a unique dynamic in the housing landscape.
So, what unfolded in the Greater Boston housing market in 2023? Let’s dissect the numbers, both in the suburbs and the city itself.
In 2023, 60% of the top 50 suburbs saw home values fluctuate within the 5% range of the previous year. A significant 62% of towns experienced an increase in median prices, with standout performers like Essex, Manchester, and Lynnfield. However, 38% witnessed declines, though only 16% had decreases of 5% or more, with Lincoln, Somerville, and Weston being the hardest hit.
The top ten towns remained relatively stable, with minimal changes in ranking. As for Boston and its condo market, it seemed to fare even better, with only Beacon Hill and Brookline experiencing slight declines. The completion of the Millennium Residence at Winthrop Center gave the midtown area a substantial boost, showcasing the demand for luxury properties.
Now, what do major companies predict for 2024? The Mortgage Bankers’ Association, Fannie Mae, Wells Fargo, and others foresee a rise in home values, while Zillow predicts a flat market. However, Morgan Stanley stands out with a 3% national decline prediction, citing increased supply due to lower mortgage rates. Despite this, local markets such as Belmont, Swampscott, Winthrop, and Boxborough currently have minimal available single-family homes, suggesting strong demand.
There’s a potential wildcard – a surge in new multi-family rental housing inventory, expected to reach levels unseen since the Nixon era. Over 600,000 new apartments hitting the rental market may impact buyer dynamics. Still, this surge seems concentrated in cities like Nashville, Phoenix, Austin, and Dallas, making it less likely to influence the Northeast.
On a personal note, my wife and I purchased our home in August of 2020. In the three years since, it’s value has increased by 32%. When rates dropped to the mid 6’s in December, a number of clients reached out indicating they would like to make a real estate move in 2024. so I can’t imagine what will happen if rates drop to the 5’s.
As we navigate the twists and turns of the 2024 housing market, one thing remains clear – the Greater Boston area is holding its ground, fueled by pent-up demand, evolving demographics, and a dynamic real estate landscape.