Massachusetts Real Estate Market Trends & Analysis


The Massachusetts real estate market has seen prices ascend to new highs in lieu of available inventory, or lack thereof. Due, in large part, to insufficient months of available inventory and improving economic conditions, sellers have been able to increase asking prices for nearly seven consecutive years.

It is worth noting, however, that the latest price increases appear to have reached a tipping point. While real estate in Massachusetts remains poised to appreciate for the foreseeable future, increases should occur at a much tempered pace. As a result, pending sales have already increased year-over-year and buyers are doing their best to balance the market.

There’s no doubt about it: the Massachusetts real estate market has a long way to go until both buyers and sellers are accommodated equally, but the latest trends are a step in the right direction. When inventory is finally able to keep up with demand, activity will increase and benefit everyone involved.

The Top Massachusetts Real Estate Markets


While the best real estate market in Massachusetts is up for debate, here’s a list of the cities investors may want to pay special considerations to:

Massachusetts Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Attorneys
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Judicial
Process Period: 3 - 4 months
Notice of Sale: Court
Redemption Period: None

Taxes

Income Tax: 5.10%
Corporate Tax: 8.00%
Sales Tax: 6.25%
Estate Tax: 16% maximum
Inheritance Tax: No
Median Property Tax: 1.04%
Property Taxes by County: http://www.tax-rates.org/massachusetts/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,564.00
Transfer Fee: Transfer tax 0.456%; County Transfer 0.342%
Origination Fee: $1,871.00

Overview


  • Median Home Value: $407,300

  • 1-Year Appreciation Rate: +1.9%

  • Median Home Value (1-Year Forecast): +0.7%

  • Median Rent Price: $2,595

  • Price-To-Rent Ratio: 13.07

  • Average Days On Market: 69

  • Unemployment Rate: 2.9% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 6,902,149 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $74,167 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 9.82%

  • Foreclosure Rate: 1 in every 3,107

Median Home Prices In Massachusetts


In order to understand home values in the Massachusetts housing market, it’s important to reflect on the last 10 years. If for nothing else, the median home price in Massachusetts is the direct result of more than a decade’s worth of volatility. Prior to the 2008 recession, local home prices had reached record highs in many parts of the state, only to succumb to the same fate as the national housing market. In a matter of about four years, prices in the Massachusetts real estate market bottomed out. By the first quarter of 2012, the median home value sank to about $275,000. However, once the recovery took hold in the first part of 2012, prices began what would turn out to be eight consecutive years of appreciation. From January 2012 to the end of 2019, the median home value in Massachusetts increased about 48.1%. Today, the median home value in the Massachusetts real estate market is approximately $407,300.

To put things into perspective, the ascent of home values in Massachusetts is similar to the rest of the country, only at a slightly tempered pace. The median home value in the United States bottomed out at about $147,000 in the first quarter of 2012 at the depths of The Great Recession. After nearly a decade’s worth of appreciation, which saw prices across the country increase 57.6%, the median home value in the United States is now $231,700. That’s not to say the real estate market in Massachusetts underperformed, but rather that the United States (as a whole) had a lot of ground to make up from the latest recession.

Despite home values across the United States increasing at a faster rate over the last eight years, median home values in Massachusetts are considerably higher than the national average. As a result, real estate in Massachusetts appears to be closer to a tipping point than the rest of the country. Prices in Massachusetts don’t have nearly as much room for growth as the United States real estate market, which would explain why the state has seen a temperance in appreciation rates over the last year.

While the median home value in the United States increased 4.7% in the last year (October 2018 to November 2019), Massachusetts homes increased an average of 1.8%. Moving forward, it’s safe to assume the trends will continue. While prices are expected to continue rising in Massachusetts, appreciation rates should top out around 2.1%. The United States real estate market, on the other hand, could see median home values appreciate by as much as 3.4% over the next 12 months.

Median Rent Prices In Massachusetts


Most real estate markets across the country exhibit a distinct correlation between home prices and monthly rental rates. More specifically, it’s common for rental rates to increase in the face of appreciation. There are, of course, exceptions to the rule, but Massachusetts doesn’t appear to be one of them. Rental rates across the entire state have managed to keep pace with appreciation. Over the last eight years, in fact, median rent listing prices have increased about 46.5%. Today, the median rental price in Massachusetts is $2,595. That’s quite a large jump, considering median rents were $1,771 as recently as January 2012.

In that same time (from January 2012 to today), median rents across the United States also managed to follow the same trajectory as home prices. While prices appreciated at a historical rate, median rents across the country jumped 25.3%. The disparity speaks to the Massachusetts real estate market and the progress it has made since the recession. The state’s economy, in particular, has facilitated a very healthy and active market, which translated to increases across the board.

With a median rent of $2,595 and a median home value of $407,300, Massachusetts’ price-to-rent ratio is about 13.07. Anything below 15 suggests it is actually cheaper to buy a house than to rent one in a respective market. However, with Massachusetts’ price-to-rent ratio bordering on 15, it’s only likely that owning a home is cheaper than renting. Again, both prices and rents have increased in a dramatic fashion. There are certainly pockets across the state that may find renting to be the cheaper alternative. At the very least, owning isn’t quite as affordable as most other states. Therefore, more residents may be inclined to rent in Massachusetts than states with lower price-to-rent ratios.

Massachusetts Foreclosure Trends & Statistics


According to RealtyTrac, one of the industry leaders in distressed property data, the Massachusetts housing market is home to a fairly average amount of distressed real estate assets. With approximately one out of every 2,750 homes in Massachusetts in some stage of distress (default, auction or bank owned), the state’s foreclosure rate is somewhere in the neighborhood of 3.6%. At that rate, the distribution of foreclosures in Massachusetts is in line with national trends, albeit slightly better. On a national level, one in every 2,453 homes are distressed, or 4.0% of the country’s inventory.

Massachusetts’ foreclosure rate has improved, thanks largely to the state’s thriving economy. Nearly every economic indicator has improved year-over-year, and more homeowners are finding themselves out from underwater because of the resulting environment. As recently as November, in fact, “the number of properties that received a foreclosure filing in MA was 3% lower than the previous month and 16% lower than the same time last year,” according to RealtyTrac.

Despite improvement in the economy and foreclosure rate, there are still some neighborhoods in Massachusetts which boast higher foreclosure ratios than others. More specifically, the following neighborhoods have the highest distributions of foreclosures in the state:

  • Hampden (1 in every 1,333)

  • Worcester (1 in every 1,817)

  • Plymouth (1 in every 1,950)

  • Bristol (1 in every 2,123)

  • Berkshire (1 in every 2,223)


Tax Lien Investing


  • Tax Lien or Deed: Can have Tax Lien State but most counties have Tax Deed Sales

  • Interest Rate: 16% for TLCs (but barely any exist)

  • Redemption Period:No redemption period following tax Deed Sale; (6 months for TLC sale but barely any exist)

Real Estate Investing In Massachusetts


Not unlike every other housing market in the country, Massachusetts real estate investors have made a habit out of investing in distressed homes. If for nothing else, distressed properties traditionally award investors with more attractive profit margins. Additionally, as their names suggest, distressed homes are typically in the possession of owners who may be better off without them. Therefore, distressed real estate across the state of Massachusetts may not only be had at a discount, but it may also be easier to acquire.

It is worth noting, however, that most of the distressed homes in Massachusetts haven’t even been foreclosed on yet. In fact, 59.5% of the state’s distressed inventory is actually considered to be homes that are merely at risk of foreclosure. Otherwise known as pre-foreclosures, assets in the possession of delinquent homeowners represent a higher risk of being repossessed. Their homeowners have neglected to keep up with mortgage payments for one reason or another, and are at risk of falling further behind. That said, there’s an increased likelihood the owners of “pre-foreclosures” will sell to investors. That way they’ll be able to avoid the foreclosure process.

With the overwhelming majority of the state’s distressed homes classified as pre-foreclosures, investors seeking attractive profit margins should take a trip to their local courthouse; there, they’ll be able to look up the contact information of each home that is currently behind on payments.

Knowing where to find distressed homes is one thing, but knowing what to do with them is an entirely different topic. Once investors locate and secure viable deals, they need to know what the next step is, which begs the question: Which exit strategies are working the best for Massachusetts real estate investors? What should local real estate investors do with these assets once they acquire them? After all, there are several options to consider.

The Massachusetts real estate market is firing on all cylinders, which bodes well for investors across the entire state. With demand persisting in the face of historical appreciation, rehabbing and wholesaling each remain viable options. However, today’s high acquisition costs may detract from profit margins. As a result, investors in Massachusetts should pay special considerations to the rental market. A cash-flowing rental portfolio is entirely capable of offsetting today’s higher prices with rental income for years.

Massachusetts Housing Market Predictions


Real estate in Massachusetts has followed the same trends as the rest of the country. However, there’s no guarantee it will continue to do so for the foreseeable future. Therefore, instead of assuming the Massachusetts real estate market will continue to follow national trends, it’s better to take a more local approach and listen to what the market is saying. Let’s take a look at what is most likely to happen in the Massachusetts real estate market sooner rather than later:

  • Optimism in the market will continue to grow: Few state-wide markets across the country have exhibited a greater propensity for success than the Massachusetts real estate market. That said, few markets are more promising than the whole of the Massachusetts housing market. The state’s growing economy, combined with increasing job opportunities, has facilitated a more active market; one that bodes well for everyone planning on participating in the bar future.

  • Home values will keep rising: Not unlike the majority of markets in the United States, Massachusetts’s potential remains limited by its inventory. There simply aren’t enough homes in the state to meet the demands of increasing buyers. As a result, competition has increased exponentially with each and every year, and so too have home prices.

  • Passive income portfolios should prevail: Few states have seen rents increase at a faster rate than in Massachusetts. The asking prices of rental properties is leaning heavily in favor of landlords at the moment. Perhaps even more importantly, however, is the state’s demand for rental properties. With home prices as high as they are, many would-be buyers are relegated to renting, propping up the rental market.

Massachusetts Real Estate Market Summary


The Massachusetts real estate market is at the forefront of national trends. Thanks primarily, in part, to the state’s strengthening economy, Massachusetts has set a high bar. The entire state has made drastic improvements to nearly every economic indicator, and real estate is better off because of it. Everyone involved (buyers, sellers and investors) has reason to be excited for what’s to come. All things considered, the Massachusetts housing market is hot, and there’s no signs of it cooling off anytime soon.

Sources:



https://www.census.gov/quickfacts/fact/table/MA/PST045218
https://www.bls.gov/regions/new-england/massachusetts.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/ma/
https://www.realtytrac.com/statsandtrends/ma/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/ma/home-values/
https://www.zillow.com/home-values/

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