A friend sent me an email to find out what I thought about the Boston real estate market.
Here is my response, slightly edited.
Anything you say to me will be held in strict confidence.
Regarding the Boston real estate market, we have had it pretty good, compared to the national real estate market. We’re not as strong as New York City, but much better than Las Vegas, Southern Florida, and areas of California. And, much much better than the “rust belt” states.
Prices in the city of Boston have stayed pretty much constant. In fact, there might even have been a slight increase in prices (on average, at least).
My expectation is that Boston will not be able to stay this strong over the coming year. I think the national economy will be dragged down so much that it will have an effect on us, here. I think our unemployment rate will go up, I think people will be a little bit scared.
As a result, they’ll either not sell at all, or have to sell at big discounts. This will lead to a slight drop in average and median price per square foot (a wild guess would be 3%?).
Going forward, I wouldn’t bank on any appreciation except at the rate of inflation. So, 3% per year? Not bad, really.
There are two reasons I believe our prices have remained high. A good economy. And, restricted supply. As you know, you cannot build anything in Boston. So much of the space is off-limits to new buildings. And, when they do build, they build big and tall. Which I like, but not everyone does.
We will see some nice developments completed over the next 18 months. The Clarendon and 45 Province, in the city. The Clarendon is a rental-condo mix, built by the guys behind the Time Warner Center in NYC. Right next to the Hancock tower, so great location. 45 Province is near Downtown Crossing, which is a negative, but close to Beacon Hill, the Common, and Financial District. The Clarendon will be + $1,000 per square foot, 45 Province is $600-$800 per square foot, which is pretty much the norm for Boston, at least in the South End / Back Bay / Beacon Hill.
If you are looking in the suburbs, I think you’ll find prices will remain high, as well. Towns have gotten so restrictive on new growth.
If you are going to buy sometime in the next year, I think you should be okay. It’d be better to wait six months, in my opinion. I think we need three-to-six months of stability before we know what’s going to happen next. I think most buyers feel the same way. We had the big credit crisis this summer, then things looked a lot better for a month, then things got bad, again. Sales volume dropped again.
Inventory in the city is not very high – around 2,000 listings which is the average it has been, over the past several years. I think some sellers are waiting to see what happens before they sell. Most sellers still have a lot of equity built up, so it’s not as if they are holding out because they can’t afford to sell. I guess they are wondering – if I sell, where the hell am I going to move? Everything else for sale is still expensive. So, unless they’re moving out of Boston, their choices are still restricted. In the old days, you’d move up to a better home and bank some money on your sale at the same time. Not possible, any longer.
Even with the new construction, I don’t think we’ll have a glut of inventory. There will be some projects that have it harder than others. In fact, some projects have already been canceled outright. This is good and bad. The bad is, we could use the new inventory to drive prices down. The good is, it will restrict supply and allow sellers to sell at high prices.
I know, it sucks trying to buy when it’s expensive, but great when you are selling, right?
So, to sum it up, again, I think we’re in a “stable” market – both in a good sense and a bad sense. I don’t think prices will go down, and I don’t think prices will go up.
In Boston, it’s all about location. If you buy anywhere in the Back Bay / Beacon Hill / South End, you should do fine. Existing units in brownstones should remain in demand. However, I would take a long hard look at properties under construction – I would be nervous buying in a project under construction where they can’t guarantee how many units are under agreement. Even then, the developer might pull out and never finish, or lose his financing, etc.
Once you get closer to searching, I would be happy to give you my opinions on the new projects, if you should decide to go that route.
In the meantime, read my blog every day. It’s very useful and interesting. It gets a ton of attention from buyers (and the press). I try to provide my readers with news they can use, in an unbiased way (although some people think I’m a sleazy Realtor, of course).
All the best.