Worcester Business Journal

14 Worcester Business Journal | January 22, 2024 | wbjournal.com F O C U S R E A L E S T A T E BY LIVIA GERSHON Special to WBJ O ver the second half of 2023, Lee Joseph, a Worcester real estate agent and president of the Realtor's Association of Central Massachusetts, noticed a shi in the single-family home market. "Even if open houses were well attended, and even if there were a lot of showings on the property, the offers received were diminished," she said. Housing has long been a sore spot in the economy of Central Massachusetts and the state as a whole, with high prices keeping home purchases out of reach for many people. Over the past two years, a combination of limited available stock and fast-rising mortgage interest rates has made the situation even worse. e good news, according to Joseph and others with an eye on home sales, is that state, local, and federal officials are pursuing policies to possibly improve things. But we shouldn't expect rapid improvement in the situation any time soon. e most significant burden on the single-family market, not just in Central Massachusetts but around the country, is interest rates. Aer holding its rates way down since the start of the Great Recession in 2008, in 2022 the Federal Reserve started raising rates higher to combat inflation. And that, in turn, has driven interest rates on mortgages into the 6-8% range. "People who have low-interest-rate loans now are reluctant to sell," said Cassidy Norton, associate publisher and media relations director at e Warren Group, a Peabody-based real estate analytics firm. With higher-interest-rate mortgages, a seller could move into a similar home but end up with much higher monthly mortgage payments, which gives homeowners an incentive to stay put, Norton said. Meanwhile, prices continue to rise, albeit not as rapidly as a couple years back, when year-over-year price increases were in double digits. e Fed has signaled it plans to cut interest rates in 2024, but Norton said potential buyers shouldn't expect a return to the rock-bottom rates. "You're still looking at interest rates that are so much higher than they used to be," she said. "People What hope for homes? Even as interest rates might drop this year, the single-family housing market isn't expected to loosen any time soon are still going to have higher interest rates and more expensive housing." Limited supply To really change the long-term prospects for single-family homes in the region, Norton and Joseph said, more homes will need to be built. at's a tricky prospect since financing for construction is subject to daunting interest rates, and the costs of land and supplies continue to rise. "I'm not seeing enough new construction," Joseph said. Another factor affecting the Central Massachusetts housing market is the continuing fallout from the shi to working from home begun with the COVID-19 pandemic. During the height of the pandemic, buyers made a rush to more rural parts of the state, including parts of Central Massachusetts, where homeowners would get homes with more space, Norton said, but it remains unclear how much that trend will continue. "It's still sort of up in the air whether people are going to go back to their offices," she said. e market is particularly difficult for would-be homebuyers from groups that traditionally have more difficulty, including first-time and first-generation buyers, as well as lower-income families and people of color. "Disparities for Black families – and families of color – who tried to get into homeownership is pretty staggering for Massachusetts as a whole," said David Sullivan, director of economic development Cassidy Norton, as- sociate publisher at The Warren Group David Sullivan, director of economic development for the Worcester chamber

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