Article Courtesy of: Banker & Tradesman
With demand from people relocating to more sun-drenched markets thanks to an ability to work remotely already fading, many Sun Belt metros face a growing risk of seeing a downturn in their housing markets, according to a new analysis. Not so in Greater Boston.
According to a new analysis by economists with listings portal and brokerage Redfin, Boston’s housing market is among the least likely nationwide to head into a downturn. Despite its high prices – nearly all its peers at the bottom of a list of 98 American metros studied were economically troubled Rust Belt cities like Cleveland, Ohio – Boston has several key advantages: low percentage price growth in 2021 relative to other metros, average loan-to-value rate of only 79 percent, low share of flipped homes and loss of population last year.
Akron, Ohio has the lowest chance of a housing downturn with an overall risk score of 29.6 followed by Philadelphia, (30.4), Montgomery County, Penn. (31.4), El Paso, Texas (32.2) and Cleveland (32.4). Cincinnati (32.6), Boston (32.6), Buffalo, NY (33.1), Kansas City, Mo. (33.4) and Rochester, NY (34).
Prices rose slower than the national median in nine of the 10 most resilient metros (El Paso is the exception), the report found. In addition, seven of the 10 markets with low-risk scores had median home prices below $300,000, which Redfin said will help homebuyers stay active even during a recession.
Highly at-risk cities like Las Vegas, Nevada and Cape Coral, Florida saw home prices jump nearly 20 percent or more in 2021 on a year-over-year basis. Many also saw 5 percent or more of their homes flipped last year. And most saw their markets cool substantially in the first half of the year, while Boston’s has only slowed to what some agents describe as “2019 levels,” a year most observers would agree was anything but a soft housing market in Massachusetts. But why are these factors pushing other areas closer to a potential drop?
“First, what goes up must come down,” Redfin Senior Economist Sheharyar Bokhari said in a statement accompanying the report. “Home prices soared at an unsustainable rate in many pandemic homebuying hotspots, both with second-home buyers and remote workers permanently relocating who were taking advantage of record-low mortgage rates. Demand driven by relocators and second-home seekers pulls back in an economic downturn, a trend that has already begun. Additionally, places where people tend to have high debt compared with their income and home equity are vulnerable because their residents are more likely to foreclose or sell at a loss.”
Greater Boston is still seeing an undeniable cool-off, market-watchers say. “Even as demand has cooled, there are still more buyers than properties for sale and that is keeping upward pressure on prices,” RE/MAX Destiny Realtor Melvin Vieira Jr. said in a statement accompanying the Greater Boston Association of Realtors’ June sales figures.
Inventory levels remain tight at just a one-to-two month supply of homes and condominiums for sale entering July, said Vieira, the GBAR 2022 president, even as showings and open house foot traffic has slowed.
Specifically, the number of single-family homes for sale within Greater Boston’s urban core, the Route 128 corridor and MetroWest rose 19.5 percent year-over-year in June, to 1,770. New listings were also up 32 percent on a month-to-month basis from 1,340 homes for sale in May and increased another 15 percent during the first two weeks of July. In the more affordable condominium market, GBAR reported listings slipped 7.8 percent from June 2021 down to 2,138 in June 2022, but did improve on a month-to-month basis, climbing 12.2 percent from 1,906 condos on the market in May and rose another 7 percent in the first 15 days of July from June 30.
“It’s a different market than it was just two to three months ago. We’re seeing fewer offers per property, while price adjustments have become more common, and homes are now sitting on the market for weeks instead of days. As a result, price appreciation has become more modest and that should continue as inventory levels climb,” he said