The city of Boston has seen record growth in the housing market over the past decade. Median selling prices have skyrocketed due to a tight supply of properties for sale and growing demand. In 2011, the average selling price for a single-family home in Boston was $375,000. Just 11 years later, that number has more than doubled to $812,000. With price growth so rapid, you might be wondering if Boston is still a good place to buy a home that will appreciate in value over the long term?
Boston is still a good place to buy real estate as the city’s long-term economic prospects are positive. Despite the current economic slump we are witnessing, there are many reasons to believe that this is only temporary and that the Boston housing market will recover. Here are some reasons why:
1. The supply problem will not go away
One of the main reasons Boston’s median price has increased so much is the limited supply of inventory for sale in the metro area. Boston is a very old city and has been developing for almost 500 years. There simply isn’t enough buildable land to meet the increasing demand for housing. The city has been scrambling to give the green light to large multi-unit condos to counter rising home prices, but we’re still lagging behind. Boston’s overall supply of properties for sale has steadily declined over the past 5 years, despite the city’s efforts to create new stock. This problem is not likely to be resolved any time soon.
2. Long-term housing demand looks positive
Despite the recession that is either upon us or already here, Boston is still creating jobs at a higher margin than the national average. According to the Bureau of Labor & Statistics, Boston saw a 6.4% increase in professional services jobs, compared to a 5.7% increase nationally. That’s no surprise to those who know that Boston is the 3rd most VC funded city in the last 5 years. This trend is unlikely to change as Boston offers tech startups a local recruiting pool unmatched: Harvard, MIT, BU, NU and more.
3. Recessions are temporary and we will likely recover faster than we did in 2008
In 2008, home prices fell by a record -8.5% in 2011. It took a full three and a half years for prices to recover to pre-recession levels. We don’t think that will be the case this time, at least not in Boston. With all the money flowing into healthcare and biotechnology in the wake of the pandemic, expect Boston to continue to attract more economic opportunity and high-paying workers. This will put additional demand pressure on an already tight supply of homes for sale in Boston.
Why is real estate in Boston so expensive?
The reason real estate in Boston is so expensive is simply because the supply of real estate for sale has not been able to keep up with the increasing demand for housing. As the local economy has grown over the past 20 years, Boston has transformed from a working-class city of the 20th century to a technology hub for white-collar workers in the new millennium. This new population group has more income and a higher standard of living. For this reason, since the year 2000, Boston’s skyline has transformed into a haven for luxury high-rises. Combine that with the scarce supply of real estate and it’s a recipe for price increases.
How much does an average house cost in Boston?
The median 1-year selling price for a single-family home in Boston as of August 1st is $816,353. This figure is up 4.46% since January 1st and +8.13% compared to September 2021. The average price for single-family homes can vary greatly depending on the neighborhood. The chart below shows the median selling price for the 24 neighborhoods near Boston that have had single-family home sales in the last year:
|area||Single Fam Med Price August 2022|
|All of Boston||$816,353|
How much does a condo in Boston cost?
The median 1-year sales price for a condo in Boston is $730,242. This figure is up 4.32% since January and +7.39% since last September. Condos tend to be cheaper in Boston due to much higher supply. Condo sales have outpaced single-family home sales by a factor of five in recent years. The table below lists the 33 neighborhoods closest to Boston in terms of average 1-year condo selling price.
|area||Condo Med Price August 2022|
|All of Boston||$730,242|
In summary, despite the rapid price growth over the past decade and the looming recession, Boston is still a good city to buy real estate. To say that Boston’s housing market is in a bubble is to ignore the fact that Boston has changed over the past 20 years. With economic expansion comes rising real estate prices, and we are confident that Boston’s economic growth will continue well beyond the current recession. Because of this, buying real estate in Boston is still a good long-term bet.
Release Date: August 30, 2022
Anthony Tse began his real estate career as a premier real estate agent in 2003. He was quickly promoted to office manager where his responsibilities included day-to-day operations, training newly licensed agents and introducing them to Boston’s large and sprawling real estate market. The bureau set new corporate records under the leadership of Anthony Tse. For investment grade real estate, Mr. Tse has extensive knowledge of the core urban areas of the Boston market as well as neighborhoods in the greater Boston area. Mr. Tse focuses on strong sub-markets and sourcing of real estate investments that generate excellent returns for his discerning investor base.