Boston’s real estate market has exploded over the past year. In June, the average home price peaked at a record $900,000, an 11% gain from June 2021, according to the Greater Boston Real Estate Board (GBREB).
Boston luxury home prices have been rising at an even faster rate, fueled by a wave of high-end condo developments. The average price hit $2.2 million in June, up 16.1% from a year earlier and nearly 30% from June 2020, according to real estate broker Redfin.
But just like in other mid-size US cities from Austin to Portland, Oregon – whose popularity had surged following Covid-era restrictions as people reassessed their housing needs – there are signs market declines began to appear. Rising mortgage rates, inflation fears and a volatile stock market are beginning to weigh on Boston’s buying spree.
The number of single-family homes sold in Boston in July 2022 fell 18.6% year-on-year — to the lowest volume in more than a decade — while condo sales fell 25% over the past year. the same period. Pending sales also fell 10% this summer, despite almost 20% more active listings, reports GBREB.
Although these falls were not the largest in the United States – key markets in Florida fared much worse – fears of a bubble have started to emerge.
“Boston is not unique because many US markets are now considered ‘overvalued,'” says Selma Hepp, deputy chief economist at real estate analytics firm CoreLogic. Boston home growth rates have fallen to 10% per year from 13 to 14% per year, according to Hepp, who says she expects that number to reach 6% by the end of 2022 and potentially the half in 2023.
The enthusiasm of some buyers remains. Across the city, a slew of ultra-luxury condo projects – in branded hotel developments like Four Seasons, St Regis and Raffles – continue to attract UHNW buyers (local and overseas) while pushing upwards. – market price. The average Raffles unit, for example, is $3.8 million, nearly double the average numbers at the top of Boston’s luxury market.
At the same time, once less favorable areas such as Dorchester — and out-of-town neighborhoods like Somerville — are attracting veteran Bostonians eager for larger spaces at lower prices.
Take Casey, who along with her husband Joey (they did not wish to disclose their surnames), recently purchased a 1,900 square foot three-bedroom condo in Dorchester’s increasingly desirable Savin Hill neighborhood for a little over $900,000. The couple – who rented in the far more expensive Cambridge – exemplify Boston’s current crop of buyers: Casey works in healthcare, Joey in finance, and both have sizable salaries and hybrid work-from-home arrangements.
“We looked around town, but we were able to get three rooms instead of two in our price range in Dorchester,” Casey says. “The area also has a nice gay population and is within walking distance of a beach.”
Coldwell Banker real estate agent Greg Dekermenjian says Casey is typical of new buyers in Dorchester, a traditionally African-American neighborhood that is actually Boston’s largest neighborhood.
“Prices in Dorchester are $500 to $700 per square foot,” he says, which is less than half the cost of historically upscale areas such as the Back Bay or South End. Dorchester is still full of traditional housing styles such as the “three-story” houses found throughout Massachusetts that Casey and Joey purchased.
The triple-deckers also form the core of an innovative housing program in East Boston. The East Boston Community Development Corporation will purchase 36 mostly three-story buildings containing 114 rental units to keep them affordable. A trust of neighborhood groups would operate the development. The project, which is expected to be finalized later this month, is the first of its kind east of the Mississippi River.
Despite these historic homes, Dorchester, like the rest of Boston, has seen an increase in the types of large-scale development whose new and upscale housing helps inflate average selling prices in the city. Dorchester’s most notable development is a 1.56 million square foot project with nearly 600 homes spread across a trio of residential buildings as well as retail space, a park, plaza and four laboratory buildings (the latter being a response to Boston’s ever-expanding biotech industry).
Still in the planning stages, the project – if completed – will form a triangle with two other equally grand redevelopment projects, including Southline Boston, which will inhabit the former headquarters of the Boston Globe newspaper.
Across town, WS Development’s sprawling Boston Seaport is a 33-acre mixed-use development near the Financial District with anchor tenants including Amazon – soon to occupy more than 1 million square feet. squares of commercial space – as well as rental and sales towers with nearly 2,200 total units. Among them is the future St Regis, where prices start at just over $2 million for a one-bedroom apartment.
Such numbers, Dekermenjian says, don’t reflect Boston as a whole, where pockets of affordability can still be found. For example, Megan, who did not wish to disclose her last name, moved with her husband and two children to a renovated three-bedroom house in Somerville two summers ago which they bought for 1.5 million dollars, just down the street from their old home.
“It was our budget and we completely assumed we would have to settle for a more remote suburb like Belmont, Arlington or Lexington,” she says. “We still can’t believe that not only could we stay in Somerville, but our kids can still walk to school.”
Purchase guide
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The Boston area is home to Harvard, MIT, and Boston University. Every year, some 150,000 college students descend on the city, with their parents being a key part of Boston’s real estate market.
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The city’s population grew by nearly 10% between 2010 and 2020 to just under 700,000.
What you can buy for . . .
$935,000 A two bedroom duplex penthouse in Dorchester (Coldwell Banker).
$1.399 million A two-bedroom, two-bathroom, 1,285 square foot condo in a converted 1890s red brick townhouse between South End and Back Bay with high ceilings, hardwood floors and an outdoor patio (Coldwell Banker ).
$17 million A six bedroom home in Back Bay designed by Louis Comfort Tiffany (Christie’s International Real Estate).
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