Outlook 2023: Western Massachusetts Realtors say home sales market is becoming ‘more realistic’

It’s the American dream – owning your own home.

But for some, that dream may take a little longer as rising mortgage rates put their dreams on hold in a market that is low on inventory as fewer people put their homes up for sale – all resulting in falling home sales.

The numbers from the National Association of Realtors have not been encouraging.

“In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the COVID-19 economic lockdowns in 2020,” said the association’s chief economist, Lawrence Yun. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows.”

To put the local market into perspective, the Realtor Association of Pioneer Valley, in its mid-January report of single family home sales for December showed a 36.8% drop year-over-year from 601 sales in December 2021 to 380 in 2022.

“2022 started off as an overheated market, where people would put their house up for sale and expect multiple offers, some having over the price, resulting in the house selling quickly. But the second half of the year was like a light switch flipping off and it became more challenging,” said Robert Molta, CEO of Berkshire Hathaway Home Services in East Longmeadow. “I think 2023 will enter us into a slower period, a more balanced market.”

Over the past decade, Molta noted, the average price of a home in Western Massachusetts has gone from about $175,000 to a little over $300,000.

“Multi-family homes are hot. We’ve seen for a while single-family homes going way over asking price, but I don’t see that happening as much as inventory has increased a little, but is still quite low,” said John Brunelle, broker-owner of B B&B Real Estate in Holyoke. “Condos are also selling well as seniors are looking to sell their homes and move into smaller properties.”

Pat Wheway, real estate agent with Coldwell Banker Realty in Longmeadow, agrees, saying, “Condos are selling like hotcakes.”

“Baby boomers are trading in their big colonials and moving into beautiful new condos, which no longer carry the distinction as places where ‘only their grandma lives,’” she said.

High interest rates are taking many first-time buyers out of the market, as well as those looking to move up, Molta said. And, as a result, adjustable rate mortgages where you get a lower interest rate for a set number of years are becoming more popular, he added.

All three Realtors note that the interest rates need to be put into perspective.

“Interest rates remained low for so many years so the market could recover from the housing crash of 2008,” Wheway said, referring to the period when property values ​​collapsed and foreclosures spiked.

“Back in the 1980s, mortgage rates were about 18% but are now at a more realistic 6 to 7% and are not going back to a time when they were at 3%,” she said, adding that the market has endured “a crazy two years” during the pandemic.

“We’ve seen some buyers offering as much as $30,000 over asking price, but also waiving inspections. If they decide they want to waive inspection, I tell them to find another Realtor,” Wheway said. “There were sellers who wouldn’t take an offer if there was going to be an inspection. What I have suggested is that they do an inspection ‘for informational purposes only.’”

Without waiving inspection, “for informational purposes only” allows the buyer an opportunity to see the house, identify things that are wrong without requiring the seller to fix them, and they can still walk away from the transaction.

Offering additional tips for those in the marketplace, Molta recommends that those considering buying a home should start saving as soon as possible in order to place a good down payment and to be pre-approved and have as high a credit score as possible.

Sellers, added Molta, should price their homes correctly and they will “likely get very close to their asking price if not the actual asking price.”

Brunelle recommends that sellers go through their property to make sure there are no structural problems and that the mechanical components of the home are in good working order.

In addition, Brunelle said, sellers should make sure the house is “clean and presentable” so when the potential buyer walks in they can “envision moving right onto the home.”

“If there is a wet mark on the ceiling, for example, get it fixed,” said Wheway. “We always go in, no matter what the price of the house is, to stage it. We move things around…..make it look more presentable.”

Whoway urges both sellers and buyers to move forward with their plans.

“I hear from others that it’s such a bad time to buy, but it’s not. Don’t wait,” she said. “I believe that we will continue to see home prices increase, but slowly and normally, and that interest rates will increase some. So, get it pre-approved so you are ready to jump when you find the house you want.”

What it all comes down to is that “ownership is important” and brings pride and enjoyment into your life as well as financial stability, said Lori Beth Chase, president of the Realtors Association of Pioneer Valley.

“Everyone dreams of owning their own home. You are building your own wealth for your family and future generations,” said Chase. “When sitting with new buyers who are renting, I always tell them the interest rate may be 6% or 7% right now, but you are paying 100% in interest with your rent. I explain to them that all of the money they are paying to the landlord is going into their pocket and they are gaining wealth, not you.”

Chase added, “You can take that income, the rent you are paying, and put it into something you are going to build equity in, something you are going to own, and that is so important for the financial wealth of every human being. ”