The Boston Globe real estate reporters throw data at their readers without enough explanation. That’s where I come in.

Larry Edelman packed a lot into his 2023 article as an example, “Where Mass. home prices are hot – and not.” Here is the translation for buyers in Spring 2023. These data sets are year over year – last January-March compared to this January-March. The Boston Globe author reminds the readers that this is not enough data to draw conclusions. 

About median prices:

  • The median price increase for single family homes was 2.2% statewide. In Greater Boston, the increase is 1.3%.
  • Median price decreased for single family homes by 5.6% in Boston and decreased by 1.3% in Southwest of Boston area.
  • Median price decreased by 5.8% in the Greater Boston Association of Realtors’ Eastern Middlesex region — a belt of northern suburbs that includes Burlington, Malden, Melrose, and Winchester.
  • Condo median prices are up 3.2% in the Boston area and 6.7% statewide.
  • Prices in typically lower-priced towns are still going up. He states a 60% increase over five years is “eye-popping.” My note: the statewide five-year appreciation is 46.9%. Your eyes should already be popped, statewide.

Now about the number of sales and the number of properties on the market:

  • Overall, the sales volume – the number of sales closed – is down 25%. This is about the business of real estate, not about the process of buying your house. In the current moment, the cause of the drop in volume is a shortage of houses and condos for sale. That does affect prospective buyers, because buyers are competing for fewer choices of properties.
  • The number of properties for sale is down 16% statewide, but up in some of the higher-priced towns. That could mean that properties in the higher-priced areas are priced too high to attract buyers. This will be good news for buyers, if it continues through the spring market.

Tim Warren, who studies real estate economy, is quoted as saying that he expects prices are “going to just be pretty flat” this year. That means that there will be little or no price inflation this year, overall.

Of course, the Boston Globe author must end an article with a scare-the-buyers sentence. This year, it is about outlying towns that have gone up 50-60% over the past five years. He writes: “With growth rates like that, they won’t be bargains for much longer.” I’m not so sure they were ever a bargain, unless that is where you wanted to live.

Summary of the situation. Spring 2023:

There are towns with some increases in properties for sale, but overall we are in a housing shortage market; this tends to create price increases. Buyers’ purchasing power is limited by interest rate changes, and fear of more interest rate increases; this tends to create a softening of price increases. It is not clear what the effect on prices will be. The expert, Tim Warren, says the prices will not go up abruptly. If he is right, this is a good year to buy.

As a buyer, you are competing with other people who are feeling the same pressures you are. Some will pay more than they want, just to get a property. If there are more of them then there are of cautious buyers, prices will keep going up. So far this early spring, that is what we are seeing during bidding wars. That makes it a hard year to buy.

So, what’s a buyer to do?

This year, you will be buying in a moderately rising market, with hints about a recession coming. What to do? If a real estate recession is coming, these are the risks:

Short-term real estate purchases are riskier than buy-and-hold property ownership.

When you buy with the intention of living there for five or more years, you spread out the costs of purchasing, selling, and nesting. As a general rule, it costs 10 percent of the property cost to buy and sell it. Those costs include mortgage fees, inspection fees, attorney fees, broker fees, moving costs, and the cost of repair, maintenance, and making the property your own.

If you are buying for the short term, and a real estate recession hits, here are the risks:

  1. Improve-and-sell buyers (flippers) are taking on an increasing risk of buying at peak, then having less demand for their improved property.
  2. Buyers who plan to owner-occupy for less than five to seven years may also find that they have not gained enough in appreciation to break even on the sale of their purchase.

Long-term purchases are less risky during a recession.

If you are living in the house, the decreased market value of it does not affect your life there. In most of Massachusetts, your property value will return after the recession and begin to increase again. If you are living there, and don’t need to sell, you can ride out the decrease in value and wait until your equity has grown again.

To be extra safe

If you want an additional hedge against losing money in a recession sale, avoid properties that are harder to sell during a recession. When buyers have more choices, they will refuse compromises that buyers would make during a hot seller’s market. Avoid these:

  1. One-bedroom or studio condos. (This is especially true in places where two-bedroom condos are common in the housing stock.)
  2. Two-bedroom houses. (This is especially true in places where three-bedroom, or bigger, houses are common in the housing stock.)
  3. Houses or condos on busy streets or other unpleasant micro-locations, like near gas stations, bus stops, marshy areas.
  4. Properties with living space in the basement.