This is the time of year I am asked by clients, friends and basically anyone who knows I'm in real estate to pull out my crystal ball and foretell the future of the market. Oh to have psychic abilities...
What I think I can safely predict is that activity in the coming year will fall somewhere between the insanity of the COVID years, and the dismal days of 2024.
Optimism for an improved 2025 no longer stems from pre-election hopes of a further drop in interest rates, but rather from the expectation of continuing strength in the jobs market, combined with potential buyers and sellers realizing that waiting for lower mortgage rates and/or a reduction in home prices may no longer make sense -- if it ever did. People have continued having babies, getting married and divorced, sending their kids off to college and there's only so long they can stay put in a home that no longer works for them.
And that explains the general expectation in the industry that we'll see more inventory in the coming year, though the increased supply is not expected to reduce home prices -- there's simply too much pent up demand. More likely, as long as unemployment stays low, home prices will continue to increase. I recently read a statistic that for every 1% increase in employment, there's a corresponding 1.5% increase in home prices.
So let's see how things look as we begin the year here in Cambridge & Somerville, starting with inventory:
There are 24 single family homes on the market today in the two cities combined, up by just one home compared to this time last year, so basically the same. Average days on market, however, are down quite a bit -- currently 73 compared to 117 on Jan 3, 2024.
For condos, we've got 105 active listings, compared to 80 this time last year. Average days on market are pretty much the same at 116 now and 114 in 2024.
Available multi-families are significantly higher now than last year, with 33 active listings compared to only 13 a year ago. Average days on market are down a bit at 98 compared to 112.
The thing to keep in mind is that most of today's inventory has been sitting around for a while. What I'm really interested in is how many NEW listings we get as we move into the spring market. Check back with me in March on that one.
It's hard to make any blanket statements on our home values with such low market activity last year, but just for fun, let's take a look at a couple specific condo scenarios where we had enough units sold to be meaningful.
Remember that these sales will be the comps that set listing prices for the spring market:
We finished 2024 with the average sale price for a 1-bedroom, 1-bath condo with no parking in Cambridge being $606,140 (based on 53 units sold).
Interestingly the average for this type of unit in Somerville was a bit higher but there were only 20 units sold and that number is skewed by several high dollar sales at the new 71 Bow Street building.
The average sale price for a 2-bedroom, 2-bath unit with one parking space in Cambridge was a whopping $1,139,971 (with 75 units sold).
In Somerville, the same type of condo averaged $930,192 (with 58 units sold).
Finally, current average weekly mortgage rates are:
30-year conforming fixed -- 6.91%
15-year conforming fixed -- 6.13%
And while in the early part of 2024, lenders and other real estate prognosticators were hoping to see 30-year FRM rates get down into the mid-5 range this year, their tune has changed. What I'm hearing now is that the lowest we can hope for is somewhere around 6%, and we may not even get there. So...
Instead of sitting on the sidelines waiting for a rate drop, a better plan would be to look at the various loan options available now. It's common these days to do better with a jumbo loan, a portfolio loan, or an adjustable rate mortgage, so reach out to a good local lender to get a rundown on their offerings -- I'm happy to give you some recommendations if you shoot me an email.
Meantime, happy new year everyone!
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