The Boston real estate market has boomed in the past year. In June, the median home price peaked at a record $900,000, an 11 percent increase from June 2021, according to the Greater Boston Real Estate Board (GBREB).
Boston luxury home prices have risen at an even steeper pace, fueled by a boom in high-end apartment development. The average price was $2.2 million in June, up 16.1 percent from the previous year, and about 30 percent from June 2020, according to real estate brokerage Redfin.
But just as in other mid-sized US cities from Austin to Portland, Oregon — whose popularity has raced in the wake of Covid-era restrictions as people reassess their housing needs — the market is showing signs of easing. Rising mortgage rates, inflation fears and a volatile stock market are starting to weigh on Boston’s buying spree.
The number of single-family homes sold in Boston in July 2022 fell 18.6 percent year-over-year — to the lowest volume in more than a decade — while condo sales fell by 25 percent over the same period. Pending sales are also down 10 percent this summer — despite more active listings by nearly 20 percent, according to a GBREB report.
Although these declines are not the sharpest in America – major markets in Florida are going much worse – fears of a bubble are starting to emerge.
“Boston is not unique because many US markets are now considered ‘overrated,’” says Salma Heep, deputy chief economist at real estate analytics firm CoreLogic. Growth rates in Boston homes have fallen to 10 percent per year from 13 to 14 percent per year, According to Hepp, which says it expects that number to reach 6 percent by the end of 2022 and possibly half of that in 2023.
Enthusiasm remains among some buyers. Across town, an array of ultra-luxury apartment projects—in hotel brands from the likes of the likes of Four Seasons, St. Regis, and Raffles—continue to attract UHNW buyers (both local and foreign) as well as paying higher-than-market rates. The average Raffles unit, for example, is $3.8 million, nearly double the average numbers at the top of the luxury goods market in Boston.
At the same time, less-favorite areas like Dorchester—and not so downtown areas like Somerville—are attracting Boston veterans who are keen on more space at lower prices.
Take Casey, for example, who recently purchased a three-bedroom 1,900-square-foot apartment in the increasingly coveted Savin Hill area of Dorchester for just over $900,000. The couple — who rented in the more expensive Cambridge — are an example of the current pool of buyers in Boston: Casey is in health care, Joey is in finance, both of whom have big pay and hybrid work arrangements in the home office.
“We searched all over town, but were able to get three bedrooms instead of two in our Dorchester price range,” Casey says. “The area also has a nice gay population and is within walking distance of the beach.”
Coldwell Banker real estate agent Greg Dickermingian says Casey is typical of new buyers in Dorchester, a traditional African American area that is actually Boston’s largest neighborhood.
“Dorchester prices range from $500 to $700 per square foot,” he says, which is less than half the cost of historically upmarket areas like Back Bay or the South End. Dorchester still abounds with traditional housing styles such as the “three-storey” homes found throughout Massachusetts that Casey and Joey bought.
Triple floors also form the core of East Boston’s innovative housing scheme. East Boston Community Development Corporation will purchase 36 mostly three-story buildings containing 114 rental homes in order to keep them affordable. Neighborhood groups trust will work on development. The project, due for completion later this month, is the first of its kind east of the Mississippi River.
Despite those historic homes, Dorchester, like the rest of Boston, has seen a boom in the types of large-scale development whose high-quality new housing helps inflate average sales prices across the city. Dorchester’s most notable development is a 1.56 million square foot development comprising nearly 600 homes spread across three apartment buildings along with retail space, a park, plaza, and four laboratory buildings (the latter being a response to Boston’s expanding biotech industry).
The project is still in the planning stages and – if completed – it will form a triangle with two additional equivalent redevelopment schemes including Southline Boston, which will reside in the former headquarters of the Boston Globe.
Across town, WS Development’s massive Boston Seaport is a 33-acre mixed-use development near the Financial District with primary tenants including Amazon—which will soon occupy more than 1 million square feet of commercial space—along with Rental and sales towers with approximately 2,200 total units. Among them is the highly anticipated St. Regis, with prices starting at just over $2 million for a one-bedroom apartment.
Dickermingian says such numbers do not reflect Boston as a whole, where pockets of affordability can still be found. For example, Megan, who did not want to reveal her last name, moved with her husband and two children into a renovated three-bedroom house in Somerville two summers ago, which they bought for $1.5 million, near their former home.
“That was our budget, and we just assumed we’d have to settle in a farther suburb like Belmont, Arlington or Lexington,” she says. “We still can’t believe that not only can we stay in Somerville, but our kids can still walk to school.”
The Boston area is home to Harvard University, the Massachusetts Institute of Technology, and Boston University. Each year, about 150,000 students descend on the city – their parents are a staple of Boston’s real estate market.
The city’s population grew by about 10 percent between 2010 and 2020 to just under 700,000.
What you can buy for. . .
$935,000 Two bedroom duplex penthouse apartment in Dorchester (Coldwell Banker).
1.399 million dollars Two bedroom, two bathroom apartment of 1,285 square feet in an 1890 red brick townhouse between South End and Back Bay with high ceilings, parquet floors and outdoor deck (Coldwell Banker).
17 million dollars A six-bedroom home in Back Bay designed by Louis Comfort Tiffany (Christie’s International Estates).
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