Where is the Boston Housing Market Heading?
Things are looking up for the Boston Housing Market. The COVID-19 pandemic had a drastic impact on last year’s housing market. As stay-at-home orders were put into place in 2020, many Americans were focusing on in-home renovations. With schools and companies moving to online platforms, work-from-home customs became the new normal. This turned many individuals away from paying high city costs and encouraged people to move out of large cities like New York and Boston.
However, with over 56% of US citizens either fully or partially vaccinated, the idea of moving back into the Boston Metropolitan Area seems to be a recent trend. Fueled by ample job opportunities and incredible costal views, Boston, which ranks #27 on "Top Cities to Live" is seeing an influx of movers back into the city (Business Insider).
In addition, Boston remains an attractive market for companies to invest in as evidence by the expansive growth that has been happening in the Seaport District. All of these factors are influencing the growth of the Boston real estate market.
As we head into the fall of 2021, here are three things you need to know:
Demand is high and inventory is low.
Boston’s real estate scene is booming. As the number of people moving into Boston is on the rise, the housing supply is scarce. Areas throughout the Boston metro area like Cambridge, Back Bay, Roxbury, Brighton, downtown Boston, Beacon Hill, Allston, Dorchester, and the South End do not have enough properties on the market to keep up with the high demand.
*Number of properties sold from June 2020 vs June 2021 in Greater Boston Area:
June 2020 June 2021
Single-Family Homes 1,150 1,848
Condominiums 706 1,596
Multi-Family Homes 119 244
As the above data shows, in June alone, Boston saw a drastic uptick of properties sold from June 2020 to June 2021. Comparatively, other months throughout 2020 compared to 2021 saw similar patterns. As Boston continues to be recognized as a vibrant city with a rich history, the demand for housing will continue to reach record high numbers as we head into the fall of 2021 and into next year.
*Data from Greater Boston Association of Realtors
Prices in Boston are much higher than they were last year.
Properties that are put on the market are going fast…and for historic prices. When you think of high prices for properties, places like New York and California come to mind. However, fueled by high demand and low inventory, median prices in Boston are much higher than they were in past years.
Throughout Boston neighborhoods, home values have gone up 7.4% over the past year (Zillow). Additionally, according to Realtor, "In June 2021, the median list price of homes in Boston was $817.4K.” This number is trending upward as houses are being sold well over the listing price. This trend is universal across condo sales, home sales, and rental properties.
For potential sellers thinking of entering the real estate market, now is the time to sell. Why is that you may ask? The average median sales price for a single-family home in Boston is $825,000 (Noradarealestate). This is over $200,000 more than the median home price in 2020. Additionally, 72% of homes are selling above listing price, far more than before the pandemic and above the national average of 56% (Masslive). These high selling prices make it an attractive market for potential sellers.
As people continue to flock to the city and inventory continues to become less and less, the average sale prices of houses, condos, and apartments will continue to be far greater than prices in previous years.
Boston multi-family homes = wise investment.
If you are looking to enhance your asset portfolio, multi-family homes are a smarter investment than single-family homes, apartments, or condominiums. A multi-family property is a single building that’s set up to accommodate more than one family living separately according to Bank Rate. As the above data shows, in June 2021, 244 multi-family homes were sold in the Greater Boston area. This number is a 110.3 percent increase from June of 2020. Monthly cash flow, tax benefits, and passive income are a few of the many benefits that makes a multi-family home a wise real estate investment.
Additionally, mortgage and interest rates are at an all-time low. In January of 2021, the national average of a 30-year fixed mortgage rate was 2.99% according to the Mortgage Bankers Association. This historically low rate provides two main advantages to multi-family home prospective buyers:
1) Purchasing power
2) The ability to build future home equity
Firstly, a low mortgage rate environment allows a buyer to have more purchasing power because you can get a higher mortgage. In other words, you can buy a more expensive property because your monthly payments are much less than what they would have been if the interest rates were higher. If you are a buyer looking to invest in your dream home, a low mortgage rate environment will provide the purchasing power you need to do so.
Secondly, the portion of a house that you own is your home equity. According to Bank Rate, home equity can be calculated by subtracting your mortgage balance from the home’s market value. A low mortgage rate enables a multi-family home buyer to build future equity over a shorter amount of time. The more money you save from a lower mortgage interest rate is more money you have in your pocket to pay back your mortgage. This means you have the ability to buy a multi-family house with a higher home value.
Home Equity = Home Market Value - Mortgage Balance
As a multi-family home buyer, there is no guarantee that these historically low mortgage rates will remain low forever. With that being said, considering purchasing a multi-family home in the current housing market will make you a wise Massachusetts real estate investor.
To check out the highest multi-family home that was recently sold by Cambridge Sage in Malden, MA click here.