With nearly 700,000 people living in Boston, it’s safe to say New England’s largest city found itself going through drastic changes over the past year.
We had the chance to sit down with Michael Ahearn, a Boston native and Realtor at Coldwell Banker in Boston’s South End. He shared his expertise as a resident and Realtor, discussing insights in the market going forward.
How has the pandemic impacted Boston real estate?
Despite the COVID-19 pandemic rattling dense cities everywhere in the United States, Boston hasn’t been affected nearly as badly as others. During the pandemic, Boston declared real estate professionals essential workers, which kept the wheel turning. Not to mention, the Fed implementing extremely low interest rates helped the housing market surge over the past year.
As of May 2021, the Greater Boston area has a hot real estate market that isn’t showing signs of slowing down.
“We’ve seen a dramatic increase in buyers looking for single-family homes in the suburbs with office space and yards,” says Ahearn. “Combining the fact that buyers are looking for space along with low interest rates, we have a hot seller’s market.”
According to the Boston Globe, the median price of a single-family home in Boston has risen to $765,000. In the suburbs, bidding wars abound. At a certain point, COVID-19 took away tourists, and the city slowed down, much like the rest of the world. However, the attractiveness of Boston has helped bring it back to the thriving city it was pre-pandemic. Foreign buyers recognize the city as a key investment as well.
Suburbs are hot, but is the city overlooked?
There’s no question that suburban living became coveted during the pandemic. But Ahearn believes that things are starting to revert to pre-pandemic norms.
“Bidding wars are more commonplace in the city once again,” he says. “Traffic is back on the roads, and people are realizing that buying that suburban single-family might not actually fit their lifestyle now that the end of the pandemic is in sight.”
Working from home will continue, but the trend towards going back to the office is fast approaching. With that in mind, buyers want shorter commutes and the convenience of public transportation.
Even though we are likely to see a shift back towards the city, there’s still untapped potential in certain neighborhoods. Ahearn listed areas that have seen spurs of luxury high rises, new shopping centers, restaurants, and other signs of development.
“There are still neighborhoods that investors should consider though, ones that have potential to appreciate healthily: neighborhoods like East Boston, Dorchester, Roslindale, and even Chelsea,” he says. “Quincy, our nearest city to the southeast, is also a great place to invest, as home values there have been steadily increasing, and it is serviced by Red Line train from Boston.”
Another positive indicator is that Boston continues to see growth when many people are leaving the Northeast. People worldwide visit the city for its rich history and move there for job opportunities in growing industries.
“Our growing biotech industry, along with other large corporations moving to and investing in Boston, is also providing a layer of insulation from market fluctuations that affect other cities (even within this state),” says Ahearn. “Foreign investors also recognize Boston as a safer place to put their capital. All these things converge to make Boston real estate a shrewd investment.”
The rental market
Boston is well-known as a popular rental area, especially for students. Prior to the pandemic, Boston had a rate of about 1%. According to Boston Pads, in March 2021, that same rate jumped all the way to 5.44%. Factors such as remote education were influencing whether students would continue to rent or live at home. While places continue to open up again, guidelines are still unclear whether students will return to school or continue remote learning.
As of right now, Ahearn thinks that the rental market in Boston is already starting to bounce back.
“Landlords in Boston were getting 25-30% less in rents than they had been in previous rental cycles,” he says. “That is changing as we continue to see monthly rents closer to pre-pandemic prices.”
Even though rental prices are still lower than what they used to be, the short supply of housing is causing a new buzz to rent. People that may have initially wanted to buy a home now have no other choice but to rent in many situations. There simply aren’t enough homes to buy, which makes people rent longer. If companies continue to bring back employees and education shifts back to in-person schooling, be on the lookout for a full rental market bounce back.
The spring market and beyond
For the real estate market in general, the spring market started back in January. With no signs of slowing down, the market will likely continue throughout the summer.
There’s lots of optimism that the pandemic end is near as the U.S. continues to open back up, especially with vaccinations being rolled out in the United States. In Massachusetts, the Mayo Clinic reported that 69% of residents have had at least one dose up to this point.
Even though restrictions are getting looser and people are more comfortable living in the city, there are still not enough homes for sale. People looking to buy a home will have to hold off and let the market level out.
“Many buyers have said ‘enough is enough’ and are temporarily suspending their searches in frustration after months of making offers to no avail. This, coupled with increasing inventory and interest rates ticking up, should help level the playing field for buyers, come late summer or early fall,” Ahearn says.
With the end of the pandemic in sight, the balance is shifting towards city living again—at least in Boston. New England’s largest city has had to shake off the repercussions of the pandemic just like everybody else. Boston is seeing a quick rebound despite going through changes. It remains an attractive spot for college students, tourists, and out-of-state investors.
What’s Up in Boston? A Realtor Breaks Down the Market is written by Kyle Spearin for www.biggerpockets.com