Boston Real Estate Market Update - May 2025

As noted in previous newsletters, the strongest drivers of housing market dynamics are interest rates and inventory. For simplicity’s sake, when I say “interest rates”, I am referring specifically to the 30-year mortgage interest rate. “Inventory” refers to the number of homes listed for sale on the market. 

Prior to the pandemic, interest rates and inventory were stable, though inventory obviously varies throughout the year, with more listings available in the warmer months than in the colder months. 

The pandemic changed all of this - suddenly interest rates were at historic lows as was inventory, causing a spike in demand and therefore a spike in housing prices. 

While interest rates, and consequently, affordability, have basically doubled since the pandemic, inventory has remained squeezed. This has resulted in housing prices continuing to rise, albeit at a slower rate than peak pandemic, despite the increase in unaffordability. 

Across the country inventory is on the rise, though some regions are affected disproportionately. 

For example, I recently saw a statistic that there are currently more listings in the state of Florida alone, than there are across Massachusetts, New York, Connecticut, New Hampshire, Vermont, Maine combined. 

As a result, properties in places like Florida and other non-New-England states are sitting on the market and selling only with deep price and terms concessions, while properties in New England are holding their value very well. 

It’s not just the theory that backs this up - the data tells the same story.

Source: FRED Active Listing Count in Boston-Cambridge-Newton MA-NH CBSA

We are still 15% off the inventory from April 2020, and a staggering 50% off the inventory from April 2017. 

This is not to say that it’s impossible inventory will spike by that much, but it would require a very dramatic economic shift. It’s made further unlikely (but again, not impossible), given that a staggering ~90% of Americans have an interest rate below where current interest rates are.

Source: FHFA calculatedriskblog.com

Mortgage interest rates are moving higher as a result of continued economic uncertainty. Estimates on where mortgage interest rates will be by year end are anyone’s guess. I’ve seen sources say low 6s, and others say low 7s. That’s a pretty dramatic range. I personally do not have a guess. Even if I were to throw a dart at the board, the chances I’m correct are about the same as my chances of being struck by lightning.

Source: FRED 30-Year Fixed Rate Mortgage Average in the United States

So what to do in light of this dramatic uncertainty?

While I don’t know what rates will do, I am putting my money where my mouth is here. Regardless of market conditions, a deal is a deal. For as long as I have been interested in real estate, I have maintained that buying a property that needs some sweat equity and holding it for a long time is by far the best thing you can do to protect yourself from any downside in real estate. 

As a simple example, let’s say you buy a home for $500,000. You can spend $50,000 renovating it and make the property worth $650,000. If the market drops dramatically by let’s say 20%, then the property is worth $520,000. You could sell it and you wouldn’t lose an insane amount of money. The renovations gave you a $100k market buffer since you spent $50k and effectively got $150k back. 

If you hold that property for 5-10 years, then, especially in the Boston area market, I’m willing to bet you don’t lose any money on that property given property values tend to go up consistently over time.