Mystery sleuths out there, here’s one for you: Just how does the Massachusetts real market continue to function when the already record low number of homes for sale keeps going even lower?
Every time it looks like the number of listings couldn’t possibly drop again, it does, with the launch of the spring market seeing big declines in both the number of homes hitting the market and the overall supply of unsold “inventory.”
Just call it the case of the incredible shrinking real estate market.
The spring market typically sees homeowners and their agents rush to put out for-sale signs to take advantage of the most active selling season of the year. The number of homes on the market jumps.
But not nearly enough homes are coming up the market this year to keep up with demand, with the number of new listings in March down 13 percent compared to a year ago, says the Massachusetts Association of Realtors.
The slower pace of homes coming on the market, combined with buyers snapping up whatever homes they can get their hands on, resulted in a 34 percent drop in the overall number of homes for sale across the Bay State in March.
That would be bad enough but for the fact that March’s big drop was the 61st time in the last 62 months that the number of homes on the market has fallen – a losing streak that now extends back more than five years, MAR reports.
The 11,892 homes that were on the market in March may sound like a lot to someone who doesn’t track this stuff, but it’s just a third or a fourth of the number of listings – and choices – that were available to buyers a decade or so ago.
Much has been written in this space and elsewhere about the main cause of this shortage, including NIMBY zoning laws and attitudes that have slowed the construction of new single-family homes in the suburbs of Greater Boston to a trickle.
But a more immediate and pressing question is how the Boston area’s increasingly dysfunctional real estate market continues to operate with so few homes for sale.
It’s not unlike one of those old Soviet-era supermarkets with long lines of shoppers queuing up in hopes of scrounging a lucky find amidst the bare shelves.
From Bad To Worse
The most obvious impact is on pricing, with the cost of buying a home having long since blown past previous highs set a decade ago during the housing bubble, in upscale urban neighborhoods and in the tony suburbs alike.
Bidding wars have long been the norm in Cambridge, Somerville and the Back Bay, but as inventory continues to drop, they are now migrating deeper into the suburbs.
A recent survey by the Massachusetts Association of Realtors found that more than half its members say they have fielded multiple bids on most or all of their listings since the start of the year.
MAR President Paul Yorkis, who runs his own real estate shop in Medway, tells me the bidding wars are now extending out to the I-495 belt and beyond.
This has made for a miserable situation for many buyers, who can very easily be stuck for months in house-hunting limbo, repeatedly losing out on one multiple bid situation after another.
Of course, what’s bad for buyers is supposed to be really good for sellers, who must be making out like bandits, right?
Well, not quite. Yes, sellers might just be able to get a price for their home that just a few years ago seemed out of reach.
But sellers are smart – they see what buyers are going through and know that there is no guarantee they will be able to find a comparable home – let alone a better one – in the town or area they want to live in. The result is that only those who have to sell – because of job moves, divorce or other issues – are putting their homes on the market. Sure, there are mover-uppers still out there, but far fewer than there have been in years past.
This reluctance by homeowners to sell unless they absolutely have to makes a bad situation even worse. It exacerbates the housing shortage caused by the dearth of new construction, which, in turn, further discourages sellers from putting their homes on the market.
We are in a vicious cycle right now. And short of some dramatic changes in zoning laws that would enable builders to meet demand for new homes in the suburbs, it will only get worse.