Massachusetts experienced a dramatic housing market surge from 2018 to 2023, creating unprecedented challenges for households earning under $250,000 annually. Home prices skyrocketed while inventory remained historically low, even as the COVID-19 pandemic and rising interest rates caused market volatility.
By 2023, the median single-family home price in Massachusetts was 51% higher than in 2018, capping off a five-year period of rapid appreciation. Yet home sales volumes went on a roller-coaster – a frenzy of buying in 2020–2021 followed by a slowdown in 2022–2023 once interest rates spiked, all against a backdrop of historically tight inventory.
For context, Massachusetts saw an all-time high of nearly 56,000 home sales in 2017, when median house prices were about $369,000. Fast-forward to 2023: annual sales plunged over 22% from the prior year to the lowest level since 2011, yet the median price hit $570,000 – a new record despite the slower sales. This striking combination of soaring prices and sliding sales underscores how severe the supply-demand imbalance became by the early 2020s.
Buyers in the sub-$250K income bracket increasingly found themselves squeezed by rising costs, intense competition (often from cash-rich investors or higher-income transplants), and a dearth of available homes in their price range.
Surging Home Prices and Affordability Challenges
One of the most significant trends from 2018 to 2023 was the surge in Massachusetts home prices, which outstripped gains in household incomes. The median sale price for a single-family home climbed from roughly $397,000 in 2018 to about $600,000 in 2023 – a 51% increase in five years. (By comparison, U.S. overall home prices rose about 30% in the same period.)
Condo prices saw a similar trajectory, rising about 41% since 2018. Even after the pandemic home-buying frenzy cooled, Massachusetts home values continued hitting new highs. The year-end 2023 median single-family price was ~$570,000 statewide – an all-time high despite higher interest rates slowing demand.
In Greater Boston’s metro area, where incomes and demand are highest, prices are even more extreme – the median house price reached $845,000 in 2023, and median condo prices around $700,000.
The Widening Affordability Gap
These price increases have greatly outpaced income growth, eroding affordability for middle-class buyers. Massachusetts already has the second-highest cost of living of any state, and housing is a major driver.
By 2022–2023, the state’s Housing Affordability Index had deteriorated to its worst levels in years (briefly improving only when mortgage rates dipped in late 2023). Many households under $250K income – which includes the vast majority of Massachusetts families – found that the kind of home they could comfortably afford in 2018 was now out of reach.
For example, a $600,000 home at 7% interest carries a much larger monthly payment than a $400,000 home at 4% interest. It’s no surprise that homeownership rates stayed essentially flat (around 61–62% in MA) despite the strong economy; prices simply rose too fast for many renters to break into the market.
By 2022 the first-time buyer share of home purchases had plummeted nationally to 24% – the lowest since the early 1980s – as young buyers struggled to compete in expensive markets like Massachusetts.
Factors Driving the Affordability Crisis
Several factors drove this affordability crunch:
- Record-low mortgage rates during 2020–2021 (under 3%) gave buyers more spending power and fueled bidding wars, which sent prices soaring.
- In 2022–2023, interest rates jumped above 6–7%, drastically increasing borrowing costs.
- The combination – home prices about 40–50% higher than pre-pandemic and interest rates roughly double what many borrowers had in 2020 – means the typical monthly mortgage payment in 2023 was hundreds or even thousands of dollars higher than just a few years prior.
- Rising rents and inflation made it harder to save for down payments. Boston-area rents spiked roughly 9–10% from late 2021 to late 2022, reaching an average of $3,400+ per month in the city.
By mid-2023, Massachusetts housing was deemed “unaffordable” for the typical local family by traditional metrics (housing costs >30% of income) in a majority of communities.
Sales Volume Swings and Buyer Demand Shifts
Homebuying activity went through dramatic swings over 2018–2023. In the late 2010s, sales were robust: 2017 set a record high with ~55,968 home sales through November, and 2018 remained strong. The market slowed slightly in 2019 when interest rates ticked up, but then the arrival of COVID-19 in 2020 initially caused a brief pause followed by an unprecedented boom in demand.
Ultra-low interest rates and pandemic-driven lifestyle changes unleashed a wave of buyers in 2020 and 2021. Many renters and urban dwellers, newly free to work from home, rushed to purchase houses with more space or yards. Massachusetts home sales and prices surged – Cape Cod sales, for example, jumped 49% year-over-year in September 2020 as city-dwellers flocked to buy homes in coastal and country areas.
By 2021, Massachusetts was on fire: one report noted 19,800 single-family home sales in the Boston area in 2021, the highest level in recent history. Realtors described homes selling within days or even hours of listing, often after bidding wars well above asking price. First-time buyers and those with moderate incomes were frequently edged out by cash offers or buyers willing to stretch their budgets.
The Market Shifts in 2022-2023
However, the tide turned in 2022 when inflation and rising interest rates tamped down the buying frenzy. Mortgage rates climbing above 5%, then 6–7%, cooled demand noticeably by mid-2022. Total sales for 2022 ended up falling from the 2021 peak.
The downtrend accelerated in 2023, as many buyers faced sticker shock at both prices and financing costs. Statewide, only 40,828 single-family homes sold in 2023, a 22% drop from 52,639 in 2022 and the fewest sales in over a decade (since 2011). Condominium sales fell as well (down ~19% year-over-year).
Homebuilders also pulled back: permits for new homes did not ramp up enough to fill the gap, partly due to labor/material costs and economic uncertainty, further limiting transactions.
Despite this pullback in volume, it’s crucial to note that demand did not disappear – it was just held back by affordability constraints. Homes that were put up for sale in 2022–23 still often attracted multiple offers; the difference was fewer people could qualify or were willing to buy at the new higher monthly costs.
Changing Buyer Demographics
The profile of buyers in this period also shifted. With first-time buyers making up only ~24% of recent purchases nationally (and likely similar or lower in MA), the market was dominated by repeat and trade-up buyers who often have higher incomes, existing home equity, or both.
The median age of buyers hit all-time highs – by 2022, the typical first-time buyer was 36–38 years old (up from early 30s historically) and the typical repeat buyer was around 59–61. This reflects how difficult it became for younger adults to break in.
Additionally, more buyers were married couples or dual-income households – a trend that speaks to the high cost barrier, as two incomes were increasingly needed to afford Massachusetts home prices.
In 2021–22 there was also an uptick in multi-generational home purchases (around 1 in 6 buyers), often with the goal of cost-sharing or accommodating adult children or elderly parents under one roof.
Inventory Crunch: Low Supply and Construction Lag
If there is one factor underpinning all these trends, it’s the chronic lack of housing supply in Massachusetts. The state entered 2018 with a housing shortage and only fell further behind by 2023.
Inventory of homes for sale hit record lows during this period. At the end of 2023, Massachusetts had only about 1 month’s supply of single-family homes on the market (around 3,500 listings statewide) – well below the 5–6 months considered a balanced market.
In fact, only about 1.6% of all homes in the state were available for sale or rent in 2022, an incredibly tight market by any standard. To put that in perspective, a “healthy” vacancy rate is roughly 2% for owned homes and 6% for rentals. Massachusetts hasn’t seen those levels in years.
The state’s comprehensive housing needs assessment in 2023 estimated 220,000 new housing units are needed by 2035 just to meet demand and ease cost pressures. This shortfall is decades in the making – new construction simply has not kept up with population and job growth, especially in Greater Boston.
Factors Worsening the Inventory Crunch
Several dynamics worsened the inventory crunch from 2018–2023:
The “Lock-in” Effect
Many existing homeowners stayed put instead of selling and moving. Baby Boomers in particular are aging in place at higher rates than previous generations. Around 78% of boomers nationally say they plan to remain in their current home for the long term.
In Greater Boston, as of 2022, seniors still occupied about 25% of all homes with 3+ bedrooms, whereas millennials with children occupied only ~12.5%. In other words, a significant chunk of family-sized housing remains “locked” by older owners.
Even those boomers who might want to downsize face hurdles: there’s a shortage of suitable condos or smaller homes in many communities, and moving would mean giving up low property taxes or an ultra-low mortgage rate they currently enjoy.
This “lock-in effect” grew even stronger after 2020 – many owners refinanced into 3% mortgages or have low property tax assessments, so selling and buying another home at 2023 prices/rates would “mean paying far more for less house”.
Investor Activity
Investor purchases increasingly siphoned off homes that might otherwise go to first-time or moderate-income buyers. A study by the Metropolitan Area Planning Council found that in Greater Boston, roughly 20–23% of all residential purchases in recent years were made by investors or speculators (often paying cash), up from about 16% in the early 2000s.
In some lower-priced urban neighborhoods, the investor share was even higher – nearly one-third of sales in dense communities of color went to investors. These include purchases by LLCs, people buying multiple properties, or landlords acquiring multi-family buildings.
Investors can outbid regular homebuyers, then turn the homes into rentals or flip them at higher prices. This specifically hurts low- and moderate-income buyers: properties that might have been an affordable starter home get taken off the ownership market and often resold or rented at prices those families can’t afford.
For example, classic Massachusetts triple-decker multi-families in cities like Boston or Worcester, which historically allowed an owner-occupant to live in one unit and rent the others, have been a target for investors.
Vacation Home Conversions
Conversion to seasonal/vacation use further limited the year-round housing stock in certain regions. Desirable vacation areas like Cape Cod, the Islands (Martha’s Vineyard, Nantucket), and parts of the Berkshires in Western MA have seen an increase in homes used as second homes or short-term rentals.
From 2010 to 2020, about 9,000 year-round homes in Massachusetts were converted to seasonal use in those vacation markets. By 2018–2022, an estimated 118,000 units statewide (about 4% of total housing) were designated “seasonal, recreational, or occasional use,” and roughly 110,000 of those sit vacant at any given time.
This trend accelerated during the pandemic, when wealthy buyers scooped up vacation homes to use as refuges or remote-work getaways.
Restrictive Zoning and Construction Challenges
Massachusetts’ notoriously restrictive zoning and lengthy permitting processes have long impeded new housing development (especially the construction of affordable starter homes or multi-family buildings).
During 2018–2023, some steps were taken – for instance, the state enacted an MBTA Communities law in 2021 requiring cities with transit stations to zone for multifamily housing. But overall, new construction did not meaningfully boost inventory in the short term.
Building a typical starter home in Massachusetts costs significantly more than the U.S. average (land prices, labor costs, and local regulations add up). As a consequence, the shrinking inventory of existing homes wasn’t offset by new additions.
What Types of Homes Are Being Purchased?
All types of homes – single-family houses, condos, and multi-family properties – saw significant activity from 2018 to 2023, but the mix of what people purchased shifted in response to prices and lifestyle preferences.
Single-Family Homes
Single-family homes remained the most coveted property type, especially during the pandemic. Traditionally, about 70–75% of Massachusetts home sales are detached single-family houses, and this held true through 2018–2023.
These homes, often with a yard and more space, are ideal for families and those leaving city apartments. Demand for single-families exploded in 2020–2021 as remote workers sought more room. This pushed the median single-family price to ~$600K by 2023.
Many first-time buyers who might have bought a house found themselves increasingly priced out and had to consider condos or continue renting. Move-up buyers (those selling one house to buy a larger one) also faced challenges: while they benefited from selling at a high price, they then had to buy into the same frenzied market.
By 2022–2023, some trade-up buyers pressed pause on upsizing plans due to the mortgage rate lock-in effect – an owner with a 3% loan on a smaller home might decide to stay rather than pay 7% on a bigger home.
Condominiums and Townhomes
Condominiums and townhomes became an important alternative, especially for first-time buyers and downsizing empty-nesters. Condos typically have lower prices than single-family homes (the statewide median condo was ~$530,000 in 2023, a bit less than the single-family median).
Throughout 2018–2023, Massachusetts saw a lot of condo development in and around Boston, Cambridge, Somerville, as well as in some suburban centers. Condos appeal to younger professionals who want to build equity but can’t afford a house, and to some older homeowners looking for less maintenance.
During the early pandemic, the condo market slowed (buyers were less interested in dense buildings and shared spaces in 2020), but by 2021 it rebounded strongly. In fact, condo prices jumped 12% in 2021 alone as urban demand returned.
By 2023, condo price growth (up ~6% that year) slightly outpaced single-family growth, and the median condo price reached a record $525K–$530K. Condo sales volume held up a bit better than single-family sales in the high-rate environment – 2023 condo sales fell ~17–19% vs. over 22% for houses.
This suggests some buyers who were priced out of houses settled for condos as an ownership path. Notably, the Greater Boston condo median ($700K in 2023) rivaled house prices in some other states, illustrating that even condos in MA are not “cheap.”
Multi-Family Properties
Multi-family properties (2–4 unit homes) also saw high demand, both from investors and from owner-occupants using creative strategies. In Massachusetts, especially in cities, it’s common to find duplexes, triple-deckers, and four-flats.
Buying one and renting out the other units (“house hacking”) is a classic way to offset the mortgage. In 2018–2023, with high prices, some ambitious first-time buyers considered multi-families so that rental income could help them qualify for a loan.
However, competition for multi-families was intense. Real estate investors, including out-of-state LLCs and local landlords, actively pursued 2–4 unit buildings as investment assets, often paying cash.
As a result, the prices of multi-family buildings surged alongside the rest of the market, and fewer remained affordable. For example, a typical triple-decker in Greater Boston that might have sold for $600K in the mid-2010s could easily sell for $1 million+ by 2022.
Regional Differences in Homebuying Trends
Massachusetts’ housing trends from 2018–2023 did not play out evenly across all regions – geography mattered, as local markets varied in affordability and demand shifts.
Greater Boston (Eastern MA Metro)
The Boston metro area (including cities inside the I-495 belt) has long been the most expensive region, and it remained so. Strong job growth in tech, biotech, and education fueled demand around Boston and Cambridge.
By 2023, median prices in many Boston suburbs were well above $700,000 (for example, the median single-family in the 64-city Greater Boston Association of Realtors region was $845K in 2023).
During the pandemic, Boston proper saw a brief exodus – census data showed Boston’s Suffolk County lost population in 2020–2021 as some residents decamped – but by 2022, the city population stabilized with return of students and workers.
Inner suburbs (like Brookline, Arlington, Newton) actually saw increased demand during 2020–21 as families left the city for more space but didn’t want to go too far. These suburbs experienced bidding wars and have extremely low inventory; many homes sell privately or within days of listing.
Gateway Cities and Low-Cost Urban Areas
Massachusetts has a set of mid-sized former industrial cities – often called “Gateway Cities” – such as Worcester, Lowell, Lawrence, Brockton, Springfield, New Bedford, Fall River, etc. These places historically had lower home prices and provided opportunities for first-time buyers.
From 2010 through 2018, they mounted a big comeback from post-recession lows. For example, Lawrence’s home prices nearly doubled (+95%) from 2012 to 2018, and Lynn’s went up ~85%, far exceeding the statewide average gain.
In 2018–2023, Gateway Cities continued to see strong price appreciation as demand spilled over from Boston. Worcester, the second-largest city, became a hotspot: its relative affordability (median prices were lower than Boston’s by hundreds of thousands) attracted not only locals but some Boston-area commuters and remote workers.
Worcester’s renaissance – new apartments, craft breweries, a minor league ballpark – made it more desirable, and home sales there hit record levels by 2021. Other gateways like Lowell and Brockton also saw sustained demand; these cities remain more affordable in absolute terms (median prices in the $300K–$400K range in mid-2020s), but their residents’ incomes are also lower, so affordability is still a challenge locally.
Suburban, Rural, and Vacation Areas
Within Massachusetts, as metro Boston grew unaffordable, some buyers looked farther out to exurban or rural areas. Towns in Central Massachusetts and even the Berkshires (Western MA) started seeing interest from remote workers or retirees.
The Cape Cod region had a very distinctive pandemic-era experience. By late 2020, the Cape and Islands were experiencing a sales boom – home sales up ~49% and prices up 24% year-over-year. Many buyers were affluent families from the Boston/NYC area buying second homes or relocating with remote work.
For example, the median single-family price on Cape Cod jumped from about $436K in Sep 2019 to $540K in Sep 2020, and has only climbed since. By 2023, Cape Cod’s median was flirting with the $600K+ range, effectively pricing out most local year-round residents (who often have lower wages in the tourism/service economy).
The consequence is a severe workforce housing shortage on the Cape – employers and hospitals struggle to recruit because workers can’t find housing. Year-round population on parts of the Cape and Islands has actually declined for this reason, with school enrollments falling as families move away.
How Budget-Conscious Buyers Have Adapted
Faced with these challenging conditions, moderate-income, budget-conscious buyers (households under $250K) adopted various strategies:
Staying Put
Many would-be buyers simply stayed on the sidelines, especially during the height of the frenzy. Rather than stretch to buy at an inflated price, some renters decided to continue renting (or living with family) in hopes the market might calm down.
Existing homeowners who might normally trade up to a bigger home often held off on moving. If they had a decent home with an affordable mortgage, many elected to “love it or list it? – stay and love it.”
This “wait it out” approach was rational for many budget-conscious households: with prices so high, the fear was buying at the top and overstretching.
Geographic Compromises
Many moderate-income buyers expanded their search radius to find affordable homes. They moved farther from Boston or job centers to peripheral regions where prices drop.
For instance, instead of buying in MetroWest Boston, a family might buy in central MA (Worcester County) or even across the border in New Hampshire or Rhode Island, accepting a longer commute or a full relocation.
Within the state, areas like the South Coast (e.g., New Bedford area), Western Mass, or far-north suburbs gained popularity as “drive-till-you-qualify” destinations. Buyers prioritized affordability over location.
Adjusting Expectations
Budget-minded buyers often revised their expectations about the type of home they would buy. Instead of a single-family with a yard, they might opt for a condo or a townhouse. Instead of a 4-bedroom “forever home,” they might purchase a 2-bedroom starter and plan to trade up later.
Some moved into homes needing renovation (sweat equity) because they could get a relative discount that way. Essentially, compromise became the name of the game: maybe it’s a longer commute, or one less bedroom, or no garage – buyers accepted these to make the numbers work.
Additionally, a segment of buyers turned to multigenerational living or renting out part of their home to afford it. The NAR data showed 17% of buyers in 2022 bought multigenerational homes specifically for cost savings or to share expenses.
Creative Financing
Many moderate-income buyers took advantage of first-time homebuyer programs, down payment assistance, FHA/VA loans, and other tools. Massachusetts has various programs (e.g., MassHousing loans, down payment grants in some cities, the ONE Mortgage program for low-income buyers).
These can reduce the upfront cash needed and offer slightly more flexible debt-to-income allowances. Mortgage lending data for 2020 showed steady participation by low/moderate-income buyers (32% of purchase loans statewide went to below-80% AMI households), indicating these programs helped keep the door open.
By 2023, some assistance programs were expanded (for example, Boston launched down payment assistance up to $50k for first-timers).
“House Hacking”
Some buyers decided to offset costs by generating income from their property. This could mean buying a small multi-family and becoming a landlord, or simply renting a spare bedroom on Airbnb, or taking in a roommate.
“House hacking” became a bit of a buzzword among younger buyers – essentially treating a home partly as an investment. For example, a buyer under 30 might buy a 3-bedroom house and rent two rooms to friends to significantly cut net housing costs.
Conclusion
The 2018-2023 period saw Massachusetts housing become increasingly inaccessible for many moderate-income residents, even those earning well into six figures. A perfect storm of inventory shortages, price escalation, and rising interest rates created unprecedented affordability challenges.
While some buyers managed to adapt through geographic flexibility, housing type compromises, and creative approaches to ownership, many others were priced out entirely or forced to delay their homebuying dreams.
The chronic supply shortage remains the fundamental issue – Massachusetts needs to add over 200,000 housing units by 2035 just to meet current demand. Until supply can catch up, the market will likely remain challenging for households earning under $250,000 annually.
References
- Massachusetts Association of Realtors – Massachusetts Home Prices Rise Modestly, Sales Plummet in 2023
- The Warren Group – MA Single-Family Home Sales Fall to 12-Year Low in 2023, New Data Shows
- Home Stratosphere – Baby Boomer Real Estate Trends in Massachusetts
- Agency Checklists – Report: Investors Adding To Mass. Housing Market Strain
- 02038 Real Estate – MA home prices continue to move higher
- WBUR News – Spurred By Pandemic, Buyers Scoop Up Homes And Mass. Prices Climb Higher
- Rhode Island Current – Vacation home trends add to Massachusetts housing crunch
- National Association of REALTORS® – Highlights From the Profile of Home Buyers and Sellers
- NerdWallet – Rent Prices Keep Rising Amid Inflation, Low Inventory
- UMass Donahue Institute – Mortgage Lending Trends in Massachusetts 2022
