Boston, MA Real Estate Market Trends & Analysis [Updated 2021]

Jump To Another Year For The Boston Real Estate Market:

The Boston real estate market is in good health, despite everything in recent history. In fact, it would appear as if real estate in Boston has every intention of “staying the course.” That is not to say “social distancing” won’t impact the market, but rather that it won’t for long. If for nothing else, plenty of shoppers are still looking to buy. Meager interest rates and pent-up demand should result in activity sooner rather than later.

There’s no doubt about it: The pandemic resulted in fewer spring and summer transactions in the Boston housing market last year. Nonetheless, fall and winter enabled the market to make up for the lost time. Local real estate is already starting to see an uptick in prices and activity. Buyers don’t want to miss out on a great time to buy before prices and interest rates increase. The investors who facilitate their transactions may find the 2021 Boston real estate market an incredible opportunity. Long-term investors, in particular, appear well-positioned to ride substantial tailwinds.

Boston Real Estate Market 2021 Overview

  • Median Home Value: $653,632

  • 1-Year Appreciation Rate: +4.8%

  • Median Home Value (1-Year Forecast): +9.6%

  • Average Days On Market (Single Family): 31

  • Median Rent Price: $2,950

  • Price-To-Rent Ratio: 18.46

  • Boston-Cambridge-Quincy Unemployment Rate: 5.9% (latest estimate by the Bureau Of Labor Statistics)

  • Boston City Population: 694,583 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $65,883 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 9.10%

  • Foreclosure Rate: 1 in every 9622 (1.0%)

[ Thinking about investing in real estate? Learn how to get started by registering to attend a FREE real estate class offered in your area. ]

Boston housing market

Boston Real Estate Investing 2021

The Boston real estate investing community enjoyed a lucrative 2020, as government initiatives spurred activity on a level few could have expected. All things considered, real estate investing across the country rode a massive tailwind, and momentum looks as if it will continue into 2021. However, it is worth noting that the most prominent exit strategies implemented over the course of last year may not be what many expect. While rehabbing has been the most popular real estate investment strategy for the better part of a decade, investors are now turning their attention to long-term strategies that focus on rental properties.

While prices are high and continuing to appreciate, the pandemic has disrupted the industry in a way few people could have anticipated. If for nothing else, the pandemic has created a unique opportunity for long-term investors. For starters, it’s never been cheaper to borrow money. As recently as January, the average commitment rate on a 30-year-fixed-rate mortgage dropped as low as 2.65%, according to Freddie Mac. Interest rates are historically low, which means investors buying rental properties can better optimize their monthly cash flow.

Outside of favorable interest rates, landlords can expect a lot of demand for their units. With a price-to-rent ratio of 18.46, it is usually better to rent than to buy a house in Boston. As a result, rental properties will see an increase in demand; that, and available inventory is already low. Even prospective buyers who want to purchase will be relegated to the renter pool because of a lack of available inventory. All things considered, landlords will have plenty of demand for their assets, which is great news for profit margins.

Rehabbing remains a viable exit strategy in the Boston housing market, but today’s indicators favor landlords. Years of cash flow may help offset high prices, and borrowing costs have never been more attractive. Despite everything going on with the pandemic, now is actually a great time to buy a house in Boston.

2020 Boston Real Estate Investing

Local investors have become the beneficiary of some rather favorable indicators. Demand remains intact, despite nearly a decade’s worth of appreciation. Many of the city’s offers are coming in over the asking price. Competition is expected to grow even fiercer, which could bode incredibly well for the entire investing community. That’s not to say there will be more buyers, but rather that there will be even fewer homes available for sale.

“I have had multiple offers over asking price on two homes that went under agreement in March,” Kurt Thompson, a broker with Keller Williams in the Leominster area and president of the Massachusetts Association of Realtors. “We are still seeing a significant shortage of homes available for sale, and the COVID-19 crisis is likely to cause some sellers to delay bringing their homes on the market, making that shortage even worse.”

Prices are historically high at the moment, which begs a couple of important questions: Is Boston real estate a good investment? Perhaps even more importantly, is it a good time to buy a house in Boston?

2020 Foreclosure Statistics In Boston

The Boston real estate market currently boasts a price point well above the national average. Not surprisingly, the latest home values are the result of nearly a decade’s worth of appreciation. In addition to increasing equity for most owners, however, the city’s impressive appreciation rate has simultaneously limited the number of underwater homeowners. Today, the city has a relatively low foreclosure rate.

With one in every 6,152 homes in some state of distress, Boston’s foreclosure rate is a healthy 1.6%. The rest of the country, on the other hand, isn’t faring as well as Boston. With a foreclosure rate of 3.4%, approximately one in every 2,893 homeowners are distressed across the whole country (more than twice the rate).

While the city’s foreclosure rate is considerably lower than the national average, the city has seen a more modest decline in one year’s time. As recently as March, in fact, “the number of properties that received a foreclosure filing in Boston, MA was 5% lower than the previous month and 5% lower than the same time last year,” according to RealtyTrac. At that same time, the national average dropped four times more than Boston’s foreclosure rate. According to RealtyTrac, “the number of properties that received a foreclosure filing in the U.S. was 3% lower than the previous month and 20% lower than the same time last year.”

Most distressed homes in the Boston real estate market haven’t actually begun the foreclosure process but instead are at risk of filing for foreclosure. Otherwise known as “pre-foreclosures,” homes delinquent on payments (and therefore at risk of foreclosure) make up 57.1% of the city’s distressed inventory. As a result, the Boston real estate investing community should emphasize this particular niche; doing so could improve their odds of finding a deal below market value. There is no better lead for a real estate investor than a motivated seller, and pre-foreclosures appear to be the city’s largest source of motivated sellers at the moment. Fortunately, delinquent property information is made available at most local courthouses. Investors who know how to navigate the data found within should compile a list of distressed homeowners who may be more likely to sell at a discount.

These numbers have yet to reflect the true impact of the Coronavirus on the Boston real estate market. While it’s too soon to say exactly what the Coronavirus will do to the real estate market, it’s fair to assume there will be an influx of foreclosure filings once all of the dust settles. For now, mortgage assistance and forbearance programs will keep homeowners in their homes, but lenders will eventually expect payments to become current. When the time comes to collect, many homeowners may find past payments compounding with current payments, making obligations more difficult to abide by. As a result, there’s a good chance the city could see an increase in foreclosures once government assistance runs out.

The real estate investing community should be looking ahead. Start lining up funding and locating potential deals, as the end of 2020 could see an influx of distressed homes hit the market.

2020 Median Home Prices In Boston

The median home value in the Boston real estate market is a very healthy $653,078. However, in order to truly understand the position of real estate prices, they must be placed in context with the national housing market. The median home price in the United States is $256,663, which begs the question: Why is Boston real estate so expensive?

The current median home value doesn’t tell the whole story. To gain a better perspective, it helps to take a step back and look at how prices have performed over a longer period of time. The median home value was as low as $386,000 approximately eight years ago (when the recovery really started to gain momentum). Since then (October 2012 to today), the median home value has increased 69.1%. The significant increase was due—primarily—to three indicators: a strengthening economy, increasing sentiment in the housing sector, and (ironically enough) a lack of available inventory. All of that, combined with a desirable place to live, helped create the perfect storm. Prices started to take off once demand fed the fire, and they haven’t looked back since.

According to NeighborhoodScout, the following neighborhoods have appreciated the most since the turn of the century, and are presumably responsible for the city’s high price point:

  • Jeffries Point

  • Decatur St / Vine St

  • Border St / Central Sq

  • Blue Hill Ave / Maywood St

  • Bremen St / Marion St

  • Chelsea St / Meridian St

  • William F Mcclellan Hwy / Addison St

  • Barnes Ave / Benner St

  • Mckay Pl / Maverick St

  • Terminal D / Terminal E

Whether or not these are the best neighborhoods to invest in remains to be seen, but there is no denying the progress they have made in a relatively short period of time.

Over the last 12 months, appreciation rates have started to cool off. From August 2019 to today, the median home value has increased a mere 1.8%. Looking forward, however, appreciation rates are expected to increase. The Coronavirus stalled increases for a short period of time, but prices have already started rising. In addition to low interest rates and low inventory levels, a government stimulus brought buyers back in droves—the increased activity spiked competition, which enabled sellers to increase prices. As a result, some experts call for prices in the Boston housing market to increase by as much as 4.1% over the next year.

Boston Real Estate Market Trends

The Boston housing market has kept pace with the national industry. However, in light of the Coronavirus, markets across the country may start to act independently. While it is too early to tell exactly what real estate in Boston will look like for the foreseeable future, it is possible to interpret the pandemic’s early impact. Here is a look at the Boston real estate trends which are most likely going to have an impact moving forward:

  • Unemployment Could Push A Recovery Back Temporarily: While Boston had a better than average unemployment rate heading into the pandemic, the city was hit harder than the national average. Whereas unemployment in Boston jumped to 15.5% in April, the national unemployment rate went from 4.4% to 14.7%. The difference could potentially prevent Boston from leading the recovery out of the pandemic.

  • Builder Inactivity Will Lead To Higher Home Prices: It took builders to the midpoint of 2020 to get back to work in most states. As a result, they are behind on adding to the city’s inventory levels. Therefore, the inventory shortages driving prices up across the country will most likely continue in Boston. With fewer homes being brought to market, Boston will remain a seller’s market, and competition will drive up prices, most likely to levels higher than before the pandemic.

  • Interest Rates Will Spark Activity: In an attempt to stimulate the economy in the face of a pandemic, the Fed dropped interest rates to historic lows. The move has already helped to offset higher prices resulting from inventory shortages, and buyers are reentering the market. Pending sales are now up 37.5% year-over-year and expected to continue rising if more sellers can list.

The Impact Of COVID-19 On The Boston Housing Market

Nearly a year into the pandemic, the impact of COVID-19 on the Boston housing market is starting to come into focus. Over the vast majority of 2020, fear and uncertainty played havoc with many of the most trustworthy indicators. Nobody knew what to make of the new market landscape in the wake of the Coronavirus. Now that we have officially turned the page on 2020, it’s safe to assume we have a better idea of the impact COVID-19 will have on the Boston housing market.

The most noticeable changes people will realize are the government’s actions to facilitate more activity. In response to the pandemic, in fact, interest rates were dropped to catalyze homebuyers. At the beginning of 2021, the average commitment rate on a 30-year fixed-rate mortgage from Freddie Mac sat at 2.65%. Today’s rates are the lowest they have ever been and have already spurred a lot of buyer activity. Homeowners and investors have come out in droves to take advantage of today’s lower rates, and more are expected to do so as unemployment continues to improve.

It is worth noting, however, that supply is nowhere close to being able to keep up with demand in the Boston real estate market. While plenty of buyers are ready and willing to act, there isn’t enough inventory. As a result, competition and home prices have increased almost exponentially. The city’s median home value has jumped 4.8% in the last year, and there’s nothing to suggest the trend won’t continue. Forecasts suggest home values could increase by as much as 9.6% over the course of 2021.

In the coming year, the fallout of the pandemic will continue to increase both demand and competition. Prices will continue to rise as long as inventory remains low. New builds are expected, but the pandemic stalled efforts. Until more homes can be brought to market, expect prices to keep rising.

Boston Housing Market: 2016 Summary

  • Median Home Price: $541,000

  • Unemployment Rate: 4.0%

  • 1-Year Job Growth Rate: 1.9%

  • Population: 667,137

  • Median Household Income: $75,667

Boston Real Estate Investing 2016

Boston real estate news couldn’t have been better for local real estate investors in 2016. The housing sector confirmed it was one of the hottest areas to own property in the entire country. Home prices skyrocketed beyond the national average, as the median home price reached as high as $558,000 on the year. While very appealing to the real estate investing community and local homeowners, even better was the city’s appreciation rate, which was one of the most competitive in the country at the time. As a result, the Boston housing market was able to build off of 2016, as it made its way to become the powerhouse it is today.

The market was a safe haven for both home price increases and equity gains. On the other hand, the city wasn’t exactly known for its affordability, even in 2016. However, despite increases, the ratio of income paid to monthly mortgage payments in the first quarter of 2016 was well below its historical average, coming in at 12.1% for the first quarter.

Unemployment was actually better than the national average, sitting at 4.0%, which was good for the time. That represents a one-year decrease of 0.6%. However, the job growth rate could have used some improvement. At the time, it was one of the primary indicators holding the city back. For the first quarter, the job growth rate was 1.9%.

Boston Housing Market: 2014 Summary

The Boston housing market demonstrated an increased propensity towards stability in 2014 compared to other metropolitan areas of a similar demographic. In the face of historically high appreciation rates, gains are starting to show signs of slowing down, once again suggesting a period of stabilization.

However, price gains were not the only thing leveling off in the Boston real estate market in 2014. It would appear as if inventory levels did the same. In recent memory, tight inventory has limited buying potential, but the number of homes for sale in 2014 didn’t meet demand. Fortunately, a shift in supply changed towards the fourth quarter, as the market stayed relatively balanced (or at least better than last year).

Boston Real Estate Investing 2014

While affordability remained an issue for some homeowners in the area during 2014, local real estate investors turned to foreclosures. In fact, the median sales price for a non-distressed home was $511,500 during the first quarter, while the median sales price of a foreclosure home was $330,000, or 35.0% lower than non-distressed home sales—a savings of more than $181,000 for real estate investors looking to capitalize on the foreclosure market.

The city had roughly 696 foreclosures on the market in 2014, each of which represented an investing opportunity. Local investors also recognized that those numbers were on the rise. Over the course of a month, foreclosures rose 16.0% during the first quarter of 2014. An overwhelming majority of the foreclosures within the Boston housing market were of the pre-foreclosure variety. In fact, pre-foreclosures during 2014 made up 64.9% of the entire foreclosure market. That was a 140.0% increase over the course of a year. Auction foreclosures represented 32.4% of the market in a distant second, while the remaining foreclosures were bank-owned. Bank-owned foreclosures were the only distressed properties that declined year-over-year. Real estate investing, as a result, has seen an uptick in the acquisition of distressed properties.

Boston Real Estate County Map:

Map of Boston neighborhoods

Boston Real Estate Market Summary

The Boston real estate market has paced the national sector for the better part of a decade. For the better part of ten years, real estate in Boston has been considered the nation’s housing sector’s upper echelon. That said, even the best market was hit hard by the pandemic. As it turns out, Boston wasn’t as insulated from the Coronavirus as it would have hoped. Unemployment spiked slightly more in Boston than the national average and has come down at a slower pace. Nonetheless, housing activity in lieu of unemployment has picked up. Once people get their feet underneath them, this market will take off. We have already seen the beginning of positive trends, and the rest of 2020 should impress.

Have you thought about investing in the Boston real estate market? If so, what are you waiting for? We would love to know your thoughts on real estate in Boston in the comments below:

Ready to start taking advantage of the current opportunities in the real estate market?

Maybe you have plenty of capital, an extensive real estate network, or great construction skills— but you still aren’t sure how to find opportunistic deals. Our new online real estate class, hosted by expert investor Than Merrill, can help you learn how to acquire the best properties and find success in real estate.

Click here to register for our 1-Day Real Estate Webinar and get started learning how to invest in today’s real estate market!

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.
🔒 Your information is secure and never shared. By subscribing, you agree to receive blog updates and relevant offers by email. You can unsubscribe at any time.