(By comparison, U.S. overall home prices rose about 30% in the same period.)
Condo prices saw a similar trajectory, rising about 41% since 2018.
Even after the pandemic home-buying frenzy cooled, Massachusetts home values continued hitting new highs.
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Massachusetts already has the second-highest cost of living of any state, and housing is a major driver.
Sales Volume Swings and Buyer Demand Shifts
Homebuying activity went through dramatic swings over 20182023.
Ultra-low interest rates and pandemic-driven lifestyle changes unleashed a wave of buyers in 2020 and 2021.
Mortgage rates climbing above 5%, then 67%, cooled demand noticeably by mid-2022.
Total sales for 2022 ended up falling from the 2021 peak.
The downtrend accelerated in 2023, as many buyers faced sticker shock at both prices and financing costs.
Condominium sales fell as well (down ~19% year-over-year).
Changing Buyer Demographics
The profile of buyers in this period also shifted.
This reflects how difficult it became for younger adults to break in.
The state entered 2018 with a housing shortage and only fell further behind by 2023.
Inventory of homes for sale hit record lows during this period.
Massachusetts hasnt seen those levels in years.
Baby Boomers in particular are aging in place at higher rates than previous generations.
Around 78% of boomers nationally say they plan to remain in their current home for the long term.
In other words, a significant chunk of family-sized housing remains locked by older owners.
Investor purchases increasingly siphoned off homes that might otherwise go to first-time or moderate-income buyers.
These include purchases by LLCs, people buying multiple properties, or landlords acquiring multi-family buildings.
Investors can outbid regular homebuyers, then turn the homes into rentals or flip them at higher prices.
Conversion to seasonal/vacation use further limited the year-round housing stock in certain regions.
But overall, new construction did not meaningfully boost inventory in the short term.
As a consequence, the shrinking inventory of existing homes wasnt offset by new additions.
What Types of Homes Are Being Purchased?
Single-Family Homes
Single-family homes remained the most coveted property throw in, especially during the pandemic.
Demand for single-families exploded in 20202021 as remote workers sought more room.
This pushed the median single-family price to ~$600K by 2023.
In fact, condo prices jumped 12% in 2021 alone as urban demand returned.
This suggests some buyers who were priced out of houses settled for condos as an ownership path.
In Massachusetts, especially in cities, its common to find duplexes, triple-deckers, and four-flats.
However, competition for multi-families was intense.
Strong job growth in tech, biotech, and education fueled demand around Boston and Cambridge.
These places historically had lower home prices and provided opportunities for first-time buyers.
From 2010 through 2018, they mounted a big comeback from post-recession lows.
In 20182023, Gateway Cities continued to see strong price appreciation as demand spilled over from Boston.
The Cape Cod region had a very distinctive pandemic-era experience.
Many buyers were affluent families from the Boston/NYC area buying second homes or relocating with remote work.
Existing homeowners who might normally trade up to a bigger home often held off on moving.
If they had a decent home with an affordable mortgage, many elected to love it or list it?
stay and love it.
Geographic Compromises
Many moderate-income buyers expanded their search radius to find affordable homes.
They moved farther from Boston or job centers to peripheral regions where prices drop.
Buyers prioritized affordability over location.
Adjusting Expectations
Budget-minded buyers often revised their expectations about the key in of home they would buy.
Instead of a single-family with a yard, they might opt for a condo or a townhouse.
Instead of a 4-bedroom forever home, they might purchase a 2-bedroom starter and plan to trade up later.
Some moved into homes needing renovation (sweat equity) because they could get a relative discount that way.
These can reduce the upfront cash needed and offer slightly more flexible debt-to-income allowances.
House Hacking
Some buyers decided to offset costs by generating income from their property.
House hacking became a bit of a buzzword among younger buyers essentially treating a home partly as an investment.
A perfect storm of inventory shortages, price escalation, and rising interest rates created unprecedented affordability challenges.
Until supply can catch up, the market will likely remain challenging for households earning under $250,000 annually.
