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February 6th, 2019 by Marco Santarelli
Introduction To Boston Real Estate Market
Boston is home to around 700,000 people, making the Boston real estate market rather large on its own. Since it contains around 80% of all residents of Massachusetts, it is certainly the first place that people choose to research, when they want to invest in the state. The broader Boston metropolitan area is home to more than four million people. For most people Boston is a high-priced real estate market, though it isn’t as expensive as Washington DC, San Francisco or New York City. Greater Boston is still an expensive place to buy a house, but the years of relentless price increase may be nearing an end.
It’s too soon to know if this trend is a blip or is the Boston housing market heading towards some stability. However, the new investors should always consider cheaper markets for investment. Because of the large number of students, college and university faculty, it is a no brainer for savvy investors to invest in a rental property in Boston. A rental property in Boston is guaranteed to get a lot of demand from tenants – whether an apartment or a condo or a single family home. In fact, any investment property is likely to get rented out fast. Airbnb rentals are one of the best options for real estate investment in Boston. Let’s look at ten reasons to invest in the expensive Boston housing market.
Boston Real Estate Market Forecast 2019
The median home value in Boston is $598,000. According to Zillow, the Boston home values have gone up 6.7% over the past year and the Boston real estate market prediction is that they will rise 8.9% in 2019. The median list price per square foot in Boston is $658, which is higher than the Boston-Cambridge-Newton Metro average of $281. The median price of homes currently listed in Boston is $699,900 while the median price of homes that sold is $628,600. The median rent price in Boston is $2,895, which is higher than the Boston-Cambridge-Newton Metro median of $2,600.
Boston Real Estate Market Trends
Boston market trends indicate an increase of $45,000 (8%) in median home sales and a -3% drop in median rent per month over the past year. The average price per square foot for this same period rose to $639, up from $618. Trulia has 783 resale and new homes in Boston lined up for you, including open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process.
The median sales price for homes in Boston for Oct 24 to Jan 23 was $620,000 based on 792 home sales. Average price per square foot for Boston was $639, an increase of 3% compared to the same period last year. The median rent per month for apartments in Boston for Dec 24 to Jan 24 was $3,300.
As per the real estate company named Redfin, the Boston housing market is very competitive. Homes in Boston receive 3 offers on average and sell in around 15 days. The average sale price of a home in Boston was $690K last month, up 13.1% since last year. The average sale price per square foot in Boston is $538, up 12.6% since last year.Homes typically receive 3 offers. Homes for sale in Boston, MA sell for around list price and go pending in around 15 days. Hot Homes in Boston, MA can sell for about 2% above list price and go pending in around 7 days.
Boston, MA Housing Market Summary
There are 1,103 homes for sale, ranging from $1 to $45M on Realtor.com. 127 of which were newly listed within the last week. Additionally, there are 2,331 rentals, with a range of $200 to $40K per month. In December 2018 the housing market in Boston, MA was a seller’s market, which means there were roughly more buyers than there were active homes for sale. Seller’s markets are generally more advantageous for sellers rather than buyers.
In December 2018, the median list price of homes in Boston, MA was $729K, trending up 1.7% year-over-year. The median listing price per square foot was $555. The median sale price was $642.5K. Homes in Boston, MA sold for approximately the asking price on average in December 2018. On average, homes in Boston, MA sell after 68 days on the market. The trend for median days on market in Boston, MA is flat since last month, and flat since last year.
There are 295 schools in Boston, MA. There are 99 elementary schools, 63 middle schools, 45 high schools and 88 private & charter schools. There are 61 neighborhoods in Boston. Beacon Hill has a median listing price of $2M, making it the most expensive neighborhood. Upper Washington – Spring Street is the most affordable neighborhood, with a median listing price of $462K.
The median list price in Boston is $1,239,500 on Movoto.com. The median list price in Boston was less than 1% change from January to February. Boston’s home resale inventories is 510, which decreased 2 percent since January 2019. The median list price per square foot in Boston is $1,041. January 2019 was $1,045. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in February.
As per the data from the real estate company called Neigborhoodscout.com, Boston is dominated by renter-occupied one, two, or no bedrooms apartments. 67.86% of Boston’s dwellings are rentals. Large apartment complexes or high rise apartments are the single most common housing type in Boston, accounting for 43.17% of the city’s housing units.
Other types of housing that are prevalent in Boston include duplexes, homes converted to apartments or other small apartment buildings ( 38.08%), single-family detached homes ( 12.21%), and a few row houses and other attached homes ( 6.36%). Cities with mostly row houses, apartments, and other high density housing types are relatively uncommon, and characteristic of compact cities that frequently have a downtown or other neighborhoods where amenities are within walking distance and a lot of street life can be seen.
Boston Foreclosures And Bank Owned Properties
Foreclosures will be a factor impacting home values in the next several years. In Boston 0.4 homes are foreclosed (per 10,000). This is lower than the national value of 1.2. The percent of delinquent mortgages in Boston is 0.8%, which is lower than the national value of 1.1%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Boston homeowners underwater on their mortgage is 6.7%, which is higher than Boston-Cambridge-Newton Metro at 3.5%.
With tougher lending practices in place by all of the top lenders in the country, it’s harder to secure a mortgage in the City of Boston than it used to be in previous years. Buyers are finding that they must qualify for a mortgage before making an offer on a property they want.
On RealtyTrac, there are currently 184 properties in Boston, MA that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 156. In December, the number of properties that received a foreclosure filing in Boston, MA was 20% lower than the previous month and 57% lower than the same time last year. Home sales for November 2018 were up 0% compared with the previous month, and down 100% compared with a year ago. The median sales price of a non-distressed home in Boston was $0. The median sales price of a foreclosure home in Boston, MA was $0, or 0% higher than non-distressed home sales.
Boston Home Prices And Appreciation Rates
Boston real estate appreciated 55.46% over the last ten years, which is an average annual home appreciation rate of 4.51%, putting Boston in the top 10% nationally for real estate appreciation. If you are a home buyer or real estate investor, Boston definitely has a track record of being one of the best long term real estate investments in America through the last ten years. NeighborhoodScout’s data show that during the latest twelve months, Boston’s appreciation rate, at 6.53%, has been at or slightly above the national average.
In the latest quarter, Boston’s appreciation rate has been 1.95%, which annualizes to a rate of 8.05%. Relative to Massachusetts, their data show that Boston’s latest annual appreciation rate is higher than 50% of the other cities and towns in Massachusetts.
10 Highest Appreciating Boston Neighborhoods Since 2000: By Neigborhoodscout.com
Should You Buy Boston Investment Properties For Cash Flow?
Boston is a thriving city, which makes it a best location to buy an investment property at any point in time including the present. The city is a wonderful place to call home. The real estate trends in Boston include mean house prices that are rising. People want to live in the city, yet the number of new homes being built is relatively low. Boston real estate market is a vibrant market, and plenty of buyers are offering more than the asking price when they love a property. Throughout the Greater area of Boston, there are numerous investment properties waiting to be revitalized by a wise investor. Let’s look at top ten reasons to invest in the Boston real estate market in 2019.
1. It Is Attractive to Millennials
Millennials are a market real estate agents want to cater to, since they’re buying homes in mass. And Boston is considered one of the cities Millennials love. The challenge for Millennials is affording a market where the median home costs around $740,000. Yet the demand from young and old alike means there’s very little inventory, much less housing stock considered affordable.
2. It Is Attracting Immigrants
Boston isn’t just attracting young people from across the country – it is also attracting immigrations from around the world. The city has seen population growth every year since 2004 in part because of the influx of immigrants attracted to the healthcare, biotech and educational jobs here.
3. The Job Market Will Keep People Coming
Boston was ranked the best city in the U.S. for startups. The large number of world class universities provides a large number of skilled workers, many of whom work in medicine, finance and biotech. The constant creation of new jobs will continue to attract residents and help the city retain the ones it already has. The economy is dominated by services, which usually pay high wages and attract more and more job seekers. All these factors have created a hot housing market in Boston, dictated by both home buyers and tenants.
4. There Is Guaranteed Appreciation
Strong demand plus limited inventory and limited space to grow will guarantee appreciation of any property you buy in the Boston real estate market. While 2019 will see home prices across the country increase between 2% and 6%, Boston will be at the upper end of that range. This is only a continuation of the steady property increases seen since the 2008 property crash.
This is partially due to the fact that the market is so built-up already that land prices are high. Then there’s the fact it can take a long time to get approval to build up. Boston’s mayor is facing flak for wanting to waive the building height rule just once. Ironically, the Boston shadow law that limits the height of buildings in the Boston housing market has the greatest impact on the downtown areas where people most want to see tall apartment and condo towers built.
5. Downtown Is Hot Market
Millennials and older adults alike are choosing to spend more on an apartment, condo or house to avoid spending hours each week commuting. It is seen as an investment in their quality of life. This explains why downtown Boston is seeing price increases far higher than the rest of the Boston metro area. Condos in downtown Boston at the end of 2018 averaged over $800,000, well above the median sale price in the Boston housing market of $618,000.
Downtown enclaves sell for much more per square foot than properties at the edge of town or in the suburbs; the price hit a thousand dollars a square foot recently. That’s expensive for the U.S. but half the price you’d pay for a comparable apartment in New York City. Ironically, the high price of real estate in NYC explains why many financial firms are expanding in the relatively cheaper city of Boston, home of the mutual fund.
6. Deals Are Becoming Available
The increase in mortgage interest rates is putting pressure on home buyers, limiting what they can afford. This in turn is leading to home builders to cut prices on new properties. According to the Washington Post, Boston home builders are cutting the price of properties on the market by 6%. If you have financing or the cash to invest in the Boston real estate market, you can’t pass up a deal like this.
7. The Huge Educational Market Is an Opportunity
The Boston real estate market and its environs include a whopping hundred universities, colleges and trade schools. There are more than 150,000 college students in Boston and Cambridge alone. You could buy properties across the Boston real estate market and cater to students, and your market is so diverse that you’ll always see demand.
8. Bureaucracy Limits Supply
Boston is an old, East Coast city. We’ve already mentioned the height law and the challenges faced getting anything approved even with the mayor behind it. Unfortunately, Boston’s entrenched bureaucracy limits the redevelopment of large garages and other major projects that could bring thousands of units to the Boston real estate market.
If it takes ten years (or more) for the Boston Harbor Garage to be redeveloped, and it is far from the only project on hold, then you can be certain to see high returns on any redevelopment project that creates more housing units within existing buildings. Whether this is converting warehouses into lofts or single family homes into multi-family housing, if you don’t face major roadblocks, you’ll see a great return on the investment.
9. Boston Is Landlord Friendly for the Northeastern U.S.
Boston is landlord friendly compared to markets like NYC. There is no limit on late fees. You don’t have to provide notice before entering the apartment. The state doesn’t require rental licenses to become a landlord. There aren’t laws regarding re-keying or pets. A written rental agreement is only mandatory if your tenant is staying more than 12 months.
Evictions are allowed if they are not paying the rent, violating the lease, or breaking the law. You can start evictions two weeks after non-payment of rent. Since evictions can take weeks, screen tenants well for any property in the Boston housing market.
10. You’ll Enjoy High ROI
Rents in the inner Boston Core hit 2800 a month. All those grad students, young single professionals and highly paid power couples are bidding up the limited housing stock available. If you can find a reasonably affordable property in the Boston real estate market and convert it to multiple units or a more upscale clientele, you’ll enjoy significant cash flow from the property.
Any future real estate investor in Boston should also have in mind that the expected rental income for both traditional rentals and Airbnb rentals is high. The combined effect of high property prices and high rental income leads to decent return on investment for Boston rental properties.
The taxes here are high compared to the U.S. average but lower than several other states in the area. The income tax rate is much lower than New York, and property taxes are far lower than New Jersey. Therefore, you’ll clear more here than some of the other large Northeast markets. Luckily for real estate investors in Boston who are interested in Airbnb rentals, they are fully legal in the Boston real estate market and are not even taxed at the moment. Recent discussions among Massachusetts lawmakers failed to result in an agreement on taxes to be charged on short-term rentals.
Boston Real Estate Investment: Summary
If you are a beginner in the business of cash flow real estate investing, it very important to read good books on real estate. You must also learn from savvy real estate investors who have retired early on in their lives by investing in some of the best real estate markets like Boston, MA. Boston is the top market where real estate investments are safe and have high rates of return. The Boston housing market sees steady population growth, faces limited supply, and can’t really go vertical. This means that those who invest in the Boston real estate market will see decent cash flow from nearly any property and guaranteed appreciation. Allston is an excellent neighborhood to buy an investment property in Boston as the median property price is well below the city level. Airbnb rentals are the best option for real estate investing in Boston.
Whether you are a beginner or a seasoned pro you probably realize the most important factor that will determine your success as a Real Estate Investor is your ability to find great real estate investments.
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Apart from the Boston real estate market, you can also invest in Jersey, City. The Jersey City real estate market is seeing significant growth because it is close to New York City but isn’t NYC. It has a number of points in its favor, too, like a good job market and local amenities. Renters and buyers alike are taking notice and helping to make Jersey City the fastest growing metropolitan area in the state.
Jersey City has been busy redeveloping old neighborhoods, encouraging a mix of new retail, luxury housing and affordable housing. Jersey City is notable for the major redevelopment on the waterfront, known as the Shore, while properties there enjoy a great view of Manhattan. Jersey City takes things one step further and is setting up a “Friendly Building Program”, where developers build entire buildings where renting through AirBnB is allowed. This is an innovative development in the Jersey City housing market.
Another market that we suggest is the housing market in Pittsburgh, PA. The Pittsburgh real estate market is seeing an incredible renaissance unlike many other Rust Belt cities. It is attracting new residents, redeveloping its downtown. And it is an excellent place to invest in real estate while it is still in the early stages of its rebound.
Huffington Post gave Pittsburgh the seventh slot on the top ten places to be a landlord. They used the average three bedroom rent of $991 a month and median home price of $105,700 to get a gross rental yield of 11.3%. The highest grossing rental market was 15.3%, but it is rare for cities to achieve that rate, much less sustain it.
Pittsburgh has been recognized as one of only four metropolitan areas out of 200 studied by economists at Realtor.com currently sustaining an optimal balance between supply and demand. This means that it’s simultaneously a good market for both buyers and sellers, as there is no dearth of affordable properties available on the market and values are steadily increasing.
Let us know which real estate markets you consider best for real estate investing! If you need an expert investment advise, you can fill up the form given here. One of our investment specialists will get in touch with you.
*Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
Attractive to Millennials
Job market https://www.bostonmagazine.com/property/2018/01/24/boston-zillow-housing-crisis
Downtown is hot
College market http://charlesgaterealty.com/2018/11/29/boston-strong-the-fast-growing-boston-housing-market
Landlord friendly https://www.avail.co/education/laws/massachusetts-landlord-tenant-law https://www.rentcafe.com/blog/renting/states-best-worst-laws-renters
Market Data, Trends and Forecast https://www.bostonmagazine.com/property/2018/10/11/boston-real-estate https://www.zillow.com/boston-ma/home-values https://www.movoto.com/guide/boston-ma/boston-real-estate-market-trends https://www.mashvisor.com/blog/where-invest-boston-real-estate-market https://www.realtytrac.com/statsandtrends/foreclosuretrends/ma/suffolk-county/boston https://www.neighborhoodscout.com/ma/boston/real-estate https://www.movoto.com/boston-ma/market-trends https://www.redfin.com/city/1826/MA/Boston/housing-market https://www.trulia.com/real_estate/Boston-Massachusetts/market-trends https://www.realtor.com/realestateandhomes-search/Boston_MA/overview https://boston.curbed.com/boston-market-reports https://www.bostonglobe.com/business/2018/11/28/there-are-signs-that-boston-area-heated-housing-market-cooling/OlvkEOZ9rmLJIHvDOvOTpK/story.html
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