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Boston Downtown/Midtown condos: Appreciation to slowdown in 2021?

Not according to Zillow, actually real estate appreciation will continue through 2025.

The Zillow press release is dated June 10th, which is work done in May – we’ve had some signs of slowing since:

With housing demand showing no signs of slowing from a pandemic-fueled boom in the second half of 2020, the expert panel has once again adjusted their home-price growth expectations upward. The panel’s average home value growth prediction for 2021 is 8.7% — the highest for any year since the inception of the quarterly survey in 2010. That’s up from 6.2% last quarter and more than double the expectation from the Q4 2020 survey (4.2%). Home value growth is expected to moderate down to 5.1% in 2022, according to the panel, which would still be strong growth compared to a historical average of about 4%.

“A profound shift in housing preferences, adoption of remote employment, low mortgage rates, and the recovering economy continue to stoke demand in the single-family market and drive prices higher,” said Terry Loebs, founder of Pulsenomics. “Strict zoning regulations, an acute labor shortage, and record-high materials costs are constraining new construction, compounding disequilibrium, and reinforcing expectations that above-normal rates of home price growth will persist beyond the near-term.”

But isn’t predicting the annual 3% home appreciation just the typical safe bet by economists?

If the actual results end up being 0% to 6%, they can say they were close.

Let’s assume they are right, however, and look at how their predictions could happen on the street.

Sellers typically list their home for more than the last guy got.  The environment is optimistic, so sellers tacking on 5% to the last sale nearby to determine their list price has been what’s been happening.

This year, virtually all of them got it, and the national rate of 8.66% above will be about right.

Next year, the 5.12% would be a likely result of many homes selling for more than 5% above the last comp, but the majority selling for 2% to 4% above.

In years 2023-2025, the majority of homes sold will be selling for about the same as the last comp.  But with a few of the special homes still closing for 5% or more above the last sale nearby, the overall appreciation rate gets dragged up into the 3s.

So it’s the 3% appreciation rate that will indicate that we’ve pulled into Plateau City.

If it goes that way, it means it will be another year before the frenzy cools off enough that buyers will have some real negotiating power.

Boston Real Estate Aprreciation FAQ

Will real estate appreciate in 2021?

The panel’s average home value growth prediction for 2021 is 8.7% — the highest for any year since the inception of the quarterly survey in 2010.

What is the home appreciation growth for 2022?

Home value growth is expected to moderate down to 5.1% in 2022, according to the panel, which would still be strong growth compared to a historical average of about 4%.

What is the historic appreciation growth in real estate?

Historic annual home appreciation is 3%

 

Boston Luxury Condos for Sale

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Boston Condo Market

Growth in Boston Downtown/Midtown condos prices has slowed and most real estate agents agree that we’re now approaching a buyer’s market (we are already in a buyer’s market in some segments, still a seller’s market in others). The official end-of-year numbers aren’t out yet, but the Regional Multiple Listing Service is showing that Boston condo prices is starting to slow down as we approach the end of 2018.

It’s important to remember that the Boston economy, in which the housing market is just one variable, moves in cycles. Good years followed by not-so-good years. Recessions followed by strong growth. Of course, the Boston housing market saw its last “down cycle” in 2009-12 after the financial collapse that reverberated through markets worldwide.

Many Boston Downtown/Midtown real estate agents are seeing a slowdown, this is partially due to seasonal adjustments.

Real Estate Deals to be made?

If investors begin to shy away from the Boston condo market in the short term, it may be possible to score some great deals on a Downtown Boston condo this winter and play the long game in growing your investment. In the meantime, if you’re renting now, buying a Boston Midtown condo still makes sense for the simple reason that your monthly payments go toward your own equity and not someone else’s.

What about selling a Boston high-rise condo? The last I heard was that the Boston population growth is on the rise, the demand for Boston luxury condos is expected to remain strong throughout the metro area. That’s because the population is not the only factor involved in whether or not people want to buy homes — another variable that economists consider is something called “household formation”, or the rate at which people decide to buy a home and settle down. For a large number of millennials now coming of age, that time will be in the next few years.

Stay tuned for our 2020 update on the Boston Downtown and Boston Midtown condo market.

Want to stay in the know? Subscribe to get the monthly market statistics from the MLS, sign up by email to follow the Boston condo market, or contact our office anytime to talk about all things real estate in the Downtown Boston condo market.

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