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A decade of record-low housing production and increasing curbs on development in Greater Boston is coming home to roost, sending prices head skyward.
Things are going from bad to worse when it comes to housing production in Massachusetts.
And it comes as the dearth of both new and existing homes on the market is starting to push prices, already far too high, to truly insane levels.
That is, unless you think nearly $2 million is a fair price for a home in Natick.
That’s the average asking price of the five – yes, only five – homes for sale there right now.
Housing construction dropped 9 percent across the state in 2020, led by a 15.7 percent plunge in new rental housing development, U.S. Census Bureau numbers show.
It’s certainly a bad way to kick off the 2020s, especially since it comes after construction of new housing in the Bay State fell to record lows in the 2010s
While single-family home construction bumped up 2 percent 2020 – or by a measly 150 homes – it wasn’t anywhere near enough to compensate for the more than 12 percent drop in 2019.
Overall, construction of new single-family homes is just a third of what it was in the 1980s, when Massachusetts, with a smaller population, was about average nationally.
This long-standing housing drought has been lurking behind the scenes for years now, helping keep prices rising faster than incomes.
But now it’s starting to distort the market in even more dramatic ways.
“Production is so vital,” said Greg Vasil, CEO of the Greater Boston Real Estate Board. “Prices are escalating because of low inventory – it’s supply and demand.”
“We can’t keep doing this,” Vasil said.
Double-Digit Price Jumps
Let’s start with prices.
The median price of a single-family home in Massachusetts jumped 11.4 percent, the biggest increase in years, to a median price of $445,000, according to The Warren Group, publisher of Banker & Tradesman.
That’s compared to the 2019’s 3.9 percent increase, too high in and of itself, but not exactly double-digit territory.
We haven’t seen double-digit increases like this since the housing bubble of the mid-2000s, and we all know how that turned out.
The continued lag in single-family home construction comes amid a post-pandemic surge of homebuying in the suburbs, as space–starved Millennials with new families search for a place with a little extra space and a yard to kick back in.
You don’t need to be an economist or math whiz to figure out the equation here. When woefully inadequate supply meets surging demand, prices go haywire.
Now, the dearth of new home construction is also starting to produce some truly crazy numbers on the inventory side, a fancy word for the number of homes for sale on the market.
Listings fell more than 35 percent in January compared to already rock-bottom levels last year, according to the Greater Boston Real Estate Board.
There were just 970 listings of single-family homes for sale in Boston and its nearby suburbs last month, the real estate group reported.
Zero Listings in Some Towns
And when you dig down to individual towns, the numbers get truly bizarre.
In Natick, those five houses are for sale in a town with over 36,000 inhabitants, according to David Bates, a broker associate at William Raveis and author of a blog on the local real estate market.
That’s down from 19 last year, already a pretty low number.
Hingham had just six listings, Walpole three, and Sherborn just one – and that was in an over-55 community.
“If you’re not 55 or over right now, there are ZERO Sherborn single–families for you to choose from,” Bates wrote in an email to me.
Overall, in Hudson, Manchester, Dover and Kingston, listings are just a quarter of what they were a year ago at this time.
The absolute dearth of homes for sale, in turn, warped prices like a funhouse mirror.
The average asking price for Natick’s five listings is $1.2 million more than the same figure for the 19 homes on the market in Natick the same time a year ago – $769,000.
In Weston, the average asking price jumped by nearly $2 million, to the $4 million range, while humbler towns like Hudson and Duxbury are up $278,000 and $374,000, respectively.
Scott Van Voorhis
Overall, of the 10 towns Bates looked at, asking prices were up by an average of half a million dollars.
“How has the razor thin availability of listings in the suburbs impacted asking prices? Kaboom! They exploded,” Bates said.
These are hard numbers to make sense of, and sure, more homes will hit the market as the spring market arrives.
But the word’s “housing crisis” no longer do justice to the situation we are in right now.
“Housing catastrophe” is more like it.
Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
