By Deirdre Fernandes | GLOBE STAFF
Mass. sales, prices were up in 2013, but rising interest rates may knock them down
TheMassachusetts housing market in 2013 experienced one of its best performances in years as sales rose to prerecession levels and prices climbed rapidly. But higher mortgage rates and lower numbers of homes for sale could put a damper on hopes for 2014.
Single-family home sales increased nearly 5 percent last year to just under 50,000, the most sold since 2006, according to Warren Group, a Boston firm that tracks local real estate activity and released the year-end data Wednesday. The median sale price, or midpoint price, for the year jumped 10 percent, to $320,000.
The condominium market also had a good year, particularly luxury condos in downtown Boston. Statewide, condo sales jumped nearly 7 percent from 2012, while the median sale price climbed to $296,000, surpassing the 2005 peak of $280,000, Warren Group reported.
In Boston, sales of luxury condominiums with amenities such as doormen, parking valets, and concierge services surged by more than 50 percent from the previous year to a record high of 420 properties, according to LINK, a Boston company that tracks condo sales in central Boston. The median price: $1.3 million.
“It’s a rapid-fire market,” said Debra Blair, president of LINK.
But Timothy M. Warren Jr., chief executive of Warren Group, said the market may already be cooling. December sales slipped below their 2012 level, the second consecutive month of year-over-year sales declines. Warren attributed the slowdown to higher mortgage rates, which have jumped a point since the beginning of the year, and the dearth of homes on the market.
In December, the inventory of homes for sale in the Boston area was down more than 30 percent from the same time in the previous year, according to the Greater Boston Association of Realtors.
With fewer homes for sale, the market took a breather, Warren said. Rising interest rates also forced some buyers to reconsider what they could afford.
“All this feeding frenzy, there was a psychological impact on those who bid two or three homes and didn’t get them and they’re seeing home prices go up,” Warren said. “It’s off-putting.”
The average US mortgage rate in December was 4.46 percent, compared with 3.35 percent in December 2012, according to Freddie Mac, the government-owned mortgage finance company. And those rates are expected to continue their march upward as the economy improves and the Federal Reserve pares back its efforts to stimulate the economy.
On Wednesday, the Federal Reserve said it would again cut its monthly purchases of government and mortgage-backed securities, a program aimed at lowering long-term interest rates. The Fed said it would cut the purchased to $65 billion a month, following amove in De-cemberto slice bond-buying to $75 billion a month, from the original $85 billion.
Still, some economists and real estate agents said rising mortgage rates could push more buyers into the market as they try to lock-in rates before they climb higher, and encourage more homeowners to put properties up for sale.
As mortgage rates rise, some potential sellers — including baby boomers wanting to downsize and families looking to move out of starter homes — may believe this is the best time to get a good price, said Barry Bluestone, the director of the Dukakis Center for Urban and Regional Policy.
Demand remains strong, he said, and sales would have been even stronger this year if more homes were on the market.
“The supply wasn’t there,” Bluestone said.
An increase in supply would help moderate the rise in prices, which have been driven in part by bidding wars on properties in desirable communities, particularly Boston and nearby suburbs, such as Newton and Brookline.
But not all Massachusetts communities are sharing in the housing recovery, said Paul Yorkis, the president of Patriot Real Estate in Medway. Home buyers are becoming more sensitive to commuting costs, looking for communities with easy access to mass transit or short driving distances to Boston.
“If you’re inside Route 128, in general many of those communities, the home values have recovered,” Yorkis said. “The further out you get out of 128 the less likely to have recovered.”
