Recent Data Suggests Home Sales May Have Turned A Corner
The latest report that the Federal Reserve compiled from banking and business contacts across New England revealed little movement in macroeconomic conditions, but it did indicate that “home sales appeared to turn a corner in recent data.”
Housing in Massachusetts is inaccessible or unaffordable for many residents, and Gov. Maura Healey last year identified housing as “the number-one issue facing this state.” Most months, real estate industry groups report the number of sales is down while the median sale price regularly sets new record highs. But the Fed said Wednesday that residential realtors recently expressed a “growing optimism” as both property listings and pending home sales increased across New England in recent months.
“Contacts cited modest declines in mortgage rates since last fall as a likely reason for buyers’ increased willingness to enter the market. Although inventory levels remained low, listings increased by modest to significant margins around the First District in recent months, lending increased optimism for sales moving forward,” the Fed wrote in the latest Beige Book, which summarizes recent business activity in the central bank’s New England district and around the country. “Still, contacts emphasized that the number of units for sale stayed far short of what they considered a balanced market, and that a dearth of inventories had contributed to faster house price growth in 2023 from 2022.”
Legislative committees are reviewing the five-year, $4.12 billion housing bond bill (H 4138) that Healey filed in the fall seeking to kickstart production of new housing units. And though there is broad agreement that the state has an economic imperative to make more housing available, some pieces of the governor’s bill — like the potential for local-option real estate transfer taxes — are viewed as controversial in the Legislature because they will add to housing costs.
The outlook was not as rosy for the commercial real estate sector and the Fed said that industry is contending with persistent uncertainty as office property loans start to come due this year.
“In the office market, leasing activity posted a slight uptick in Providence and moved sideways at a slow pace elsewhere, while vacancy rates were unchanged,” the Fed said. The report added, “Office market prospects remained weak, as leasing demand was expected to stay tepid, and credit to stay tight, amid ongoing uncertainty over the fate of office loans maturing in 2024. Nonetheless, the office outlook did not worsen since the previous report.”
