Top 10 Markets in Massachusetts that Could See a Price Correction
The Top 10 Markets that Could See a Price Correction
I am on the record saying that I do not believe that the state of Massachusetts as a whole will see a housing crash with severe price corrections. I am also on record saying that I do believe some towns in our market have more potential for a minor price correction than others.
I have been repeatedly asked which towns in Massachusetts are the most likely to see some sort of pricing correction and because I didn’t have any data… I was always reluctant to provide any answers. Well, that changes today! This is a data driven analysis. No back handed feelings helping drive up or down a specific market. And there were towns that I personally deep down feel like should be on this list… But the data says otherwise.
So, what specific data metrics did I look at? The first metric that I wanted to look at were the markets with the largest appreciation gains since 2019. I disqualified any towns that had less then 50 sales as I felt that was not enough sales data with one or two outliers being to easily able to skew the data one way or another. .
It is my belief that the towns that had the largest gains would most likely be the ones that give it back. For example, the #1 town on the list has seen nearly a 59% increase in the average sales price since 2019. That is nearly 15% per year. But the 20th town on the list had a little over a 65% increase in sales prices. So, what gives?
I channeled my investment banking days when I traded mortgages to come up with these calculations and this list. When evaluating risk on a pool of mortgages, we would look at certain obvious characteristics like average down payment percentage, average FICO scores and asset concentration. But another area of very specific importance was second homes and investment property concentration. We didn’t want to buy into a pool of mortgages with a high investor or 2nd home concentration because these were considered more risky assets.
It makes sense when you take a moment to consider why. Let’s imagine a person having their primary house as well as a second home, and then they fall on hard times… Which one are they going to be more inclined to fight to keep? Not only keep, but make sure they stay current on their mortgage? Most likely their primary residence. And let’s say I owned an investment property that was generating income, but was unemployed and couldn’t pay my personal mortgage. What am I most likely to do? I would most likely take that income from the investment property to pay my primary residence mortgage to ensure that a roof is kept over my kids heads.
This is why investment properties and 2nd homes are considered to be more risky loans. And because they are considered more risky, this is also why their interest rates are higher!
So, knowing this, I knew that there needed to be some data layered on top of the high increase in average sales prices. I found data that gave a foreclosure risk by county based off of 2021 purchase mortgages that were “risky”. These mortgages include homes that were FHA mortgages, Investor and 2nd Homes.
I layered this data and the home price data and came up with this top 10 list of housing markets in Massachusetts that have the highest potential of a housing price correction in a market slowdown.
Number 10: Athol, Massachusetts is the 10th most likely town to see a price correction. The average sale price in 2019 was $180,674 and grew over 66% to have an average sales price of $300,541 year to date in 2022. On average, home owners in Athol have seen nearly a $120,000 increase in their house pricing with a yearly average of 16.6%. On August 31st, Athol had 17 houses currently on which is the exact same number of houses on the market on August 31, 2021. The average listing price in 2021 was $394,264 compared to the 2022 asking price of $348,917. Search all Athol Homes For Sale.
Number 9: Harwich, Massachusetts comes in at number 9 for the most likely town to see a pricing correction. The average sales price in 2019 was $627,886 and grew 56% to an average sales price of $977,606. This is a $349,721 price gain in the span of 3 years and 8 months. As of the end of August there were 14 Single Family homes for sale in Harwich for an average listing price of $2,081,492. This is compared to August of 2021 when there were also 14 houses on the market for an average asking price of $942,985. Todays average may be a little of an outlier as there are currently two houses on the market in Harwich over $3,000,000. There were no houses like this on the market back in 2021. Search all Harwich Homes For Sale.
Number 8: Mashpee, Massachusetts ranks as the 8th most likely town to see a pricing correction in Massachusetts. Mashpee saw a $340,252 average home price appreciation from 2019 through 2022. The average sales price in 2019 was $606,915 vs today’s average sales price of $947,167. This represents a 56% increase in the average sales price or a little over 14% per year. There were 45 Single Family homes on the market at the end of August of 2022 vs the 33 on the market at the end of August in 2021. The average asking price in 2021 was $1,805,009 versus the average asking price in 2022 at $1,717,098. Search all Mashpee Homes For Sale.
Number 7: Falmouth, Massachusetts is the 7th most likely town to see its pricing go down in a Real Estate market slowdown. In Falmouth we have seen prices increase $345,677 since 2019 from $613,378 to $959,055 for the first 8 months of 2022. This represents a little over a 14% per year increase in the average sales price. As of the end of August of 2022 there were 63 Single Family homes on the market for an average listing price of $1,951,292 compared to the 61 houses on the market at the end of August of 2021 with an average asking price of $1,928,204. Search all Falmouth Homes For Sale.
Number 6: Bourne, Massachusetts is the 6th most likely town to see a pricing correction in Massachusetts. Their average sales price of $456,449 in 2019 grew to $722,941 in 2022. This is a 14.6% yearly increase for $266,492 over the 3 years and 8 months. There were 35 homes on the market for an average asking price of $867,017 at the end of August of 2021 versus the 39 on the market at the end of August of 2022 for an average asking price of $805,411. Search all Bourne Homes For Sale.
Number 5: Harvard, Massachusetts ranks at the fifth most likely town to see a price decrease. The average sales price of $627,317 in 2019 grew to $1,076,645 in 2022 for a 17.9% average yearly appreciation rate. This equates to an average gain of $449,328 per homeowner. There were 11 homes on the market at the end of August of 2022 for an average listing price of $1,335,536. This is compared to the 6 homes on the market at the end of August of 2021 for an average listing price of $722,950. There are currently three homes for sale that are for sale between $2 to $3 million which is what is making it for such a high increase in the average price currently on the market. Search all Harvard Homes For Sale.
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Number 4: Sandwich, Massachusetts finds it’s way on the list as the fourth most likely town to see home prices decrease in the upcoming downturn. In 2019, the average sales price was $461,536 and increased $294,009 for an average sales price of $755,546 year to date in 2022. This represents nearly a 16% increase in home prices throughout that time period. There were 56 Single Family homes for sale in Sandwich at the end of August in 2022 with an average asking price of $1,029,608. This is compared to the 43 houses on the market at the end of August in 2021 for an average asking price of $777,869. The huge increase in sales price averages is due to the 3 houses that are for sale in between $2 and $3m as well as the one house for sale in between $3 to $4 million. Search all Sandwich Homes For Sale.
Number 3: Orleans, Massachusetts is the third most likely town to see home prices decrease in Massachusetts. The average sales price in 2019 was $841,380 with prices increasing $552,165 to $1,393,545 in 2022. This is an average of 16.4% in home price appreciation for Orleans. We had 18 houses on the market for an average listing price of $2,666,522 in August of 2022 which is compared to the 18 houses we had on the market at the end of August 2021 for an average listing price of $2,958,000. Search all Orleans Homes For Sale.
Number 2: The second most likely town to see a price correction in Massachusetts is Eastham, Massachusetts. The average sales price in Eastham was $583,166. Homeowners in Eastham saw an increase of $388,441 for an average sales price of $971,607 in the first 8 months of 2022. This represents a 16.7% yearly average in appreciation. At the end of August in 2022, there were 9 houses on the market for an average asking price of $971,111. This is compared to the 10 houses that were on the market at the end of August of 2021 for an average asking price of $939,290. Search all Eastham Homes For Sale.
Number 1: And the number 1 Massachusetts housing market that is most likely to see a pricing correction is Chatham, Massachusetts. In 2019, the average sales price was $1,041,803. Chatham’s average sales price would increase by an astounding $971,217 to $2,013,020 in the first 8 months of 2022. This means that the average home price in Chatham increased by an average of 23.3% per year since 2019! There were 28 houses on the market for an average asking price of $2,962,178 at the end of August 2022. This is compared to the 23 houses on the market on August 31st of 2021 for an average asking price for $3,301,159. Search all Chatham Homes For Sale.
And there you have it. That is my top 10 list for housing markets in Massachusetts that IF we were to see housing price declines would be more likely in my opinion to see them. It’s important to note that there is no guarantee. Just because this is what the data is saying right now, does not mean that this is guaranteed in anyway in the next 12 or 24 months. It’s just data that is pointing us down a road of higher likely possibilities.
I think it is important to note that if we didn’t layer the foreclosure risk data on the list and were just to go off the markets that had the biggest percentage gains, then there are some other honorable mention towns that would make their way on the top 10 list. These towns include Cohasset Homes For Sale, Newbury, Merrimac and Orange, Massachusetts.
I will say that I think there was an interesting trend to the data and the list. A lot of these towns are in areas that in the past would be considered vacation towns… And still are… But definitely saw an uptick of year-round folks that enjoyed the change to virtual working. But what does the future hold with companies and them bringing people back into the office? I have noticed that people’s opinion on whether businesses and how many businesses will bring people back in vary widely.
This all could be very interesting to watch play out. Because if Cape towns are affected negatively from people going back into the office, then that would mean towns closer to Boston could be more positively affected. Darn Covid… Just doesn’t stop making our lives difficult!
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