THE BIG PICTURE
In the world of Boston real estate, the past two years have felt chaotic, exciting, confusing, competitive, and so much more. In times like this it’s important to take a step back, take a deep breath, and take a look at 22 years of housing data.
2000 - 2022
Over the past 22 years, the average sales price for a condo in the City of Boston has appreciated by an average of 6.11%, year over year. A buyer's market is defined as 6 months or more of housing supply. Boston constantly struggles with supply and demand - the pace of renovating and building never keeps up with buyer demand due to the number of health care, finance, bio-tech and other professionals constantly relocating to Boston in need of housing.
Want to know how the Boston market reacts to supply and demand issues? Pricing Goes Up. Over the last 22 years, Boston has experienced a non-seasonal dip in the market twice - 2008 and 2020 (Covid). In both instances, the market rebounded and started to add value within 12 months. The chart above clearly demonstrates that over 22 years, a Boston homeowner will experience solid, steady appreciation. The best comparison to Boston real estate is buying Apple stock – it’s rarely a bargain, it has occasional dips (during which time savvy investors buy more), but everyone holds it because they know it will produce steady, long-term growth. This is what gives buyers and investors consistent confidence in the Boston market.
2021 - 2022
The two graphs above represent the chaos that was the Boston real estate market in 2021-2022. What the data above demonstrates is that we see occasional blips up and occasional blips down. A blip, for our purposes, is defined as a loss or gain in value of up to 10% over a short period of time (not more than two quarters). In the housing and mortgage driven meltdown of 2008, the core downtown Boston market lost less than 5% in value (9.42% citywide) while other major metropolitan cities, like Miami, were down over 25%. In the last 22 years we have not seen a protracted loss of value in the Boston real estate market that isn’t then replaced by slow and steady growth, quickly recapturing the previous losses.
The two graphs above show a blip (this time an increase in value) that only lasted two quarters. The 2021 blip that resulted in a swift increase in sales prices rapidly corrected in Q3 and Q4 of 2022 due to economic factors – mortgage rates rose as a result of the Fed taking specific action to abate inflation which caused turbulence in the stock market and talks of recession. When you layered the news of war, it created enough uncertainty for most buyers to put their home search on hold.
THE MORAL OF THE STORY
Now that mortgage rates have settled down, the stock market has moderated away from daily swings, and the Fed policies have been effective at curbing inflation - the uncertainty that put buyers on the sidelines has dissipated. Buyers who were searching in the spring of 2022 and weren’t able to win a bidding war, but continued to monitor the market, have smartly re-entered the market sensing a buying opportunity at now normalized prices.
It constantly baffles us that buyers wait until the spring market to be involved in countless bidding wars, where properties are sometimes selling 10-15% higher than they were just three months before. It seems as of late, that the fantastic media headlines (which is typically forecasting national real estate data) is deterring people from buying and driving down sentiment. This is why it is so important to have real-time localized market data. National numbers tend to lag the market by 1-3 months, which renders it irrelevant.
Boston isn’t New York or Miami, we can't build 10 new towers of condos every year. Boston sees 1-2 larger scale buildings every 2-3 years, producing 300-400 properties which does not make a dent in buyer demand.
If the last 2 years have felt like a roller coaster, take a step back, take a deep breath, and look at the data. It’s clear that the Boston real estate market is kinda boring! When we do see a 5-10% dip, we take advantage of it for our clients. Unfortunately, our prediction for the spring market is a return to a competitive environment for buyers and an increase in sales prices of up to 10%. In the past 15 days, we have made some very good deals for clients and we would like to keep it that way.
