Boston’s real estate market got chin-checked last month as total property sales in August dropped -38.26% compared to August 2021. Last month’s 476 real estate sales was the lowest total for August in the past 5 years and the largest year over year drop in monthly residential real estate deals over the same time span in Boston.
Monthly property sales in Boston real estate have been trending below 2021 levels all year, with December 2021 being the last month where total sales were up year-over-year. Still, that figure never trended more than 25% below the previous year’s sales total until last month. Last month marked a sharp drop from the 771 property deals recorded in August 2021.
It appears like the Federal Reserve’s rate hikes have finally put a chill on the Boston housing market, with news of their 4th rate hike of 2022 coming last month. Now with last week’s news of another rate increase of 75 basis points, we can expect this trend to gain momentum as we head towards 2023.
Despite the sharp drop in sales, Boston’s median sale price from August is still up +6.79% year-over-year, and sitting at $800,433. That price has been trending downwards since it hit a record high $876K in May. Interestingly, the average price per square foot last month ($700) was the lowest total level recorded since April of 2021.
A closer look at the property unit data may explain why this is happening. Condo sales saw the biggest drop in sales last month (-43.48%) in Boston, which typically have the highest cost per square foot. Multifamily properties, typically the lowest cost per square foot of all three property types, only saw a -12.2% drop in total sales. The data suggests that the current interest rates are pushing out smaller buyers from the market much faster than the big whales. With interest rates still on the rise and a recession looming, more demand destruction is on the horizon. Look for median prices to finish the year well below $800K. We will continue to monitor these trends as they develop.