Housing market challenges in Massachusetts, what to know and how to navigate

SPRINGFIELD, Mass. (WGGB/WSHM) - Home buyers beware: perpetually rising house prices continue to keep potential homeowners from putting down the money to get into a new home.

Meanwhile, interest rates have started falling from 2023′s record highs that were well into the 7% range, but the drop is not inspiring consumers to snatch homes off the market.

Western Mass News sat down with housing market experts who shared the contributing factors to these housing market trends and resources available in Massachusetts to help first-time home buyers navigate the turmoil in the American housing market.

Buying a home in 2024 is becoming one of the toughest tasks for Americans nationwide.

Realtor Erica Swallow told us, “On the national scale, this is not a great buyers’ market in most markets. Here in Massachusetts, we continue to see ramped-up home prices and pent-up demand, which is making it very difficult for buyers, especially first-time home buyers.”

The numbers at a glance are working against potential homeowners.

According to the National Association of Homebuilders, the median price for a new home in the U.S. in 2020 was just about $337 thousand. Fast forward to the latest numbers in 2023, and sales prices have ballooned to $427 thousand. That’s a $90 thousand increase.

Interest rates aren’t helping out potential home buyers either.

From 2014 right up until the COVID-19 pandemic in 2020-2021, average mortgage rates hovered within the three to four percent range right up until 2022 when rates skyrocketed to 5.3 percent eventually reaching 6.8% in 2023...

Realtor Jack Watson told us the pandemic years can be considered the root cause of America’s housing market woes.

“At the beginning of COVID, if you look from an economic standpoint, we were due for some kind of economic downturn. When that happens, home prices usually stabilize, or they go down a little bit. In this case, when COVID happened it created an environment where people can work from wherever they want and live wherever they want. That definitely started it and since then we’ve been riding this wave.”

On the other side of the coin, sellers are becoming more reluctant to put their house on the market when they’re looking to upgrade their living situation.

With millions of millennials ready to buy, older folks aren’t willing to give up their low interest rates for a new home.

Watson explained, “There are so many homeowners, who either can’t move because they can’t give up their interest rate or they can’t move because they feel like there is nothing out there to buy, so when that happens you have a huge amount of demand with buyers who need homes and a huge amount of no supply.”

However, despite the national numbers, Swallow explained that our area is a sellers’ market at the moment.

People working in Boston, Providence, and Hartford, are opting for western Mass for lower home prices at more reasonable rates.

However, while the houses are flying off the market just as fast as they’re put up for sale, locals looking to stay in the area are having to compete with higher income earners to turn the key.

Swallow stated, “That is not great for our local market and residents of western Massachusetts because they are now contending with these buyers who have much better ability to purchase. About 34% of national home sales transactions are cash transactions and that is true in our market as well.”

But let’s get down to the hard numbers: how much do you need to buy?

We’re taking a single-income earner with no debt as our example looking to buy a $300,000 house.

Putting 3.5 percent down, $10,500.

We calculated the monthly expenses to be right around 2,500 dollars.

Banks typically don’t want your expenses to exceed 36% of your monthly gross income, meaning you have to make just about $83,000 a year in a country where the median household income is about $75,000 according to the census.

Our realtors told us Massachusetts has grants available to ease the financial burden of that first home purchase.

Watson explained, “Chicopee is one of the greatest cities at this because they incentivize people buying multi-families and living in them. That’s something I’m a huge proponent for. The city of Chicopee has a program where if you buy a triplex and live in the triplex then they’ll give you a $16,000 forgivable loan at closing. You don’t have to pay for your down payment and your closing costs.”

Swallow added that buyers should also look for different ways to purchase, saying, “Think about the condition of the home. The homes that are getting the most amount of offers are the perfect homes that are in turn-key condition. They should be looking at some of the homes that are a little bit of a fixer-upper maybe. Maybe it doesn’t have the perfect kitchen or maybe it has all the square footage you need and you’ll just need to rip out some old carpets. So, you’ll only have to do small things in the home to make it yours.”

For more grant information for Massachusetts homebuyers, click HERE:

massachusetts first-time home buyer | programs & grants (themortgagereports.com)