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Have we reached the peak real estate frenzy yet? Have Greater Boston’s already stratospheric home prices finally reached their zenith?

It would be great to be able to point to local factors to predict whether we’ve reached the top of the market, whether it’s Eastern Massachusetts’ ever shrinking supply of homes for sale or buyers finally getting fed up with crazy prices.

The median sale price of a single-family home in Massachusetts hit $350,000 during the first three months of 2018, up from $285,000 five years ago, according analysis from The Warren Group, publisher of Banker & Tradesman. Upscale suburbs have led the way, with 20 percent to 30 percent increases from Andover to Belmont, the latest Warren Group stats show.

But the answer to what the future holds for home prices in the Boston area is likely to hinge on national and global forces well beyond the control or impact of anything that happens within the I-495 beltway.

We’re talking about things like a stock market collapse, the inevitable turn of the business cycle, full-fledged trade war with China or any number of conceivable boneheaded blunders that President Donald Trump, our unruly toddler-in-chief, flirts with on a daily basis.

“We might not have hit the top of the market, but I predict by this time next year, we will be looking at the market peak in our rear view mirror,” said David Bates, local market enthusiast and broker associate at William Raveis Real Estate.

More Buyers in the Wings

Certainly the trends at work in Greater Boston’s real estate market will play an important role when the current bull market in real estate inevitably comes to an end.

First there’s our region’s long-standing housing shortage, with listings dropping another 28 percent in February compared to a year ago, to a record low of 9,494, according to the Massachusetts Association of Realtors.

As the number of homes for sale has shrunk, demand on part of buyers has soared, sparked by our booming, research-based, biotech and tech rich local economy.

The decline in inventory, coupled with the rise in demand, has pushed prices relentlessly upward and left an increasing number of middle-class families boxed out of the market.

It’s also taking a toll on sales, with a drop to 9,832, down 388 homes from last spring, after rising from steadily from 7,869 in 2013.

Here’s a small sample of how crazy home prices have gotten in the past five years, when the real estate recovery kicked into high gear. In the western suburbs, Acton has seen a $200,000 jump while Belmont now tops $1.1 million, up from $750,000.

Once solidly middle-class Natick’s median price now stands at $600,000, inconceivable a decade ago, while Framingham, at $400,000, is catching on with buyers priced out in Natick.

Cambridge has seen its home prices more than double, rising from $711,000 to more than $1.5 million, while Somerville tops $750,000, up from $511,000.

It’s not a sustainable picture. The Boston area’s growing unaffordability is a threat to our region’s economic competitiveness and, for that matter, its social fabric.

But with all other things being equal, the real estate market inside 495 could probably go chugging along in its dysfunctional way for who knows how long; certainly beyond next year.

Inventory has been dropping for years and has yet to derail the market, despite the unhappy situation this creates for Boston-area buyers forced to pay top dollar for cramped Capes or rundown ranches.

Even as some buyers are priced out, others are moving to take their place, as new companies flock to Boston and Cambridge to plant their headquarters flags and build new research complexes. If Amazon chooses Boston for its new headquarters, this could dramatically stoke demand, with tens of thousands of new jobs in the offing.

“Based on the number of competing offers that buyer-agent members of the Massachusetts Association of Buyer Agents are seeing, it looks like there is at least two to four years of pent-up buyer demand if the current inventory levels remain fairly stable,” said Sam Schneiderman, vice president of the Massachusetts Association of Buyer Agents and principal broker at Greater Boston Home Team.

Beyond Our Borders

But we don’t live in a bubble. At some point, wider economic trends will decisively intrude to tip the balance in the Boston market. The question is when.

After racking up some crazy gains last year, the stock market has gone into volatility mode over the last several months and now threatens to flatten out. If that happens, the luxury market is likely to take a hit, with buyers of multimillion-dollar condos and homes having more of their assets tied up in the market, Bates said.

If the economy starts to slow and job creation stumbles, that will put a damper on demand for homes in the middle and low end of the market.

The yield on short-term U.S. Treasury bonds is rising, in what has been described as an ominous sign of a potential downturn ahead. (The idea being that higher yields are needed to attract investors due to the increase in risk.)

Add to that the negative volatility Trump has brought to just about everything related to the economy, politics, society, civic norms, you name it, and predicting smooth sailing for the real estate market for years to come would definitely seem a bit naïve.

Are we at the peak yet? It all may depend on what new kind of crazy the Trumpster cooks up over the next year.

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at 

Another Year of Record-Breaking Prices

by Scott Van Voorhis time to read: 4 min