Posted at 1/15/2013
We now believe we discern a new stage, indeed a new New Paradigm in the Greater Boston housing market. It is being driven by fundamental changes in the underlying economy, by the aging of the baby boom generation, by a possible new influx of younger households and by shifting consumer behavior. If our projections are reasonably correct, these changes will usher in fundamental changes in both the homeownership market and the rental market. If developers, communities and state and local government respond proactively to these underlying changes, we will be in a better position to fulfill the moral responsibility of providing affordable housing to all who need it. Moreover, we will better meet the economic necessity of lowering the housing cost hurdles that make it diffi- cult for young households to remain in Greater Boston, while simultaneously lowering a barrier to those who would like to move here.
When it comes to the condominium market, nearly all of the action is seen right in the heart of the region. Downtown Boston has continued to outdistance by far all other places in the region for condominium sales over the past three years . The eight communities portrayed have been among the top 10 each year since 2010, and of those eight, four (Downtown Boston, South Boston, Dorchester and Jamaica Plain) are neighborhoods of Boston. Moreover, the other four (Cambridge, Brook- line, Somerville and Newton) all border Boston. Thus, it is quite evident that, in the center of the Greater Boston region, the condominium continues to reign supreme as the dominant force in the housing market.
Now all signs indicate a much more robust recovery in the hous-ing market than seemed to be happening in 2010 . In the first six months of 2012, there were 3,931 housing permits issued in the five-county Greater Boston region. This figure was nearly 75 percent as high as the total number of building permits issued in the entire year of 2011. At this rate, the region will be on pace to permit more than 7,800 new units of housing in 2012, which would be the highest annual total since 2007. Data from January through June indicate that the strongest rebound is underway in the region’s 5+ unit apartment and condominium build- ings. If permitting trends hold steady through the end of 2012, Greater Boston should expect to issue nearly double the number of permits for such rental and condominium units, compared to 2011. Thus, renewed vigor within the apartment and condo markets seems to be the primary driver of the recovery in the region’s overall housing market.
Finally, in 2012, we see more evidence that the housing crisis in Greater Boston is beginning to abate. Sales are picking up and new housing permits are being issued in greater numbers than we have seen since 2008. For more than a year now, sales have exceeded their monthly totals of 2011. With sales increasing, housing developers are becoming more optimistic about their ability to sell new units if they construct them. As a result, new housing permits are up, and the number issued could be as much as 50 percent higher in 2012 than in 2011 and two-thirds (67%) higher than in 2009. While single-family permits are up modestly, devel- opers already see a stronger market for units in large apartment and condominium complexes as the up-and- coming segment of the housing market.
These vacancy rates, in confluence with other factors in the region’s housing market, have contributed to the steady escalation in rents in Greater Boston for years on end. Since 2003, both the average asking rent (the price sought by landlords and published in ads) and the average effective rent (the rent ultimately negotiated between landlords and tenants, taking into account various discounts) have increased in every year but one. The high cost of renting an apartment in Greater Boston becomes clearest when comparing the region to others across the nation. Out of 20 of the U.S.’s major urban areas, only two—New York and San Francisco—have consistently experienced higher average rents than Boston since 2000.
From this, we can take away the Boston housing market is taking off. Renting in Boston remains costly, making home-ownership a more financially sound investment. Contact Group Boston Real Estate, and one of our talented, knowledgeable agents will advise you what course of action is most appropriate for you.