Asset Based Lending is committed to helping our borrowers reach their financial goals through smart real estate investments, so our expert team has decided to highlight markets with lots of money-making potential. Each month we will do a deep dive into a real estate market that can benefit an investor looking to fix and flip, start new construction, or embark on some other form of real estate investing.
This month’s market is the greater Boston area, a real estate market that has seen record breaking home sales and median prices throughout 2020. These property sale numbers are projected to continue rising into 2021, but rental property vacancies in the area continue to increase as well, making the area better suited for short-term real estate investments for the foreseeable future. While there are too many cities included in the greater Boston region to list here, some of the major cities that contributed to this data compilation include the following: Boston, Cambridge, Waltham, Burlington, Woburn, Lexington, Somerville, Bedford, Newton, and Portsmouth.
Boston Home Sales Breaking Records
A report from GBAR, the Greater Boston Association of Realtors, has shown record breaking numbers in October 2020 that are projected to continue for the remainder of the year and beyond. The total number of detached single-family homes sold were the highest on record for October at 1,433, which is a 36.9% increase from the amount sold in October 2019. The median sale price for these detached single-family homes also broke records, coming in at $700,000 which is an 18% increase from the median sale price of the previous year. Condominium sales are also breaking records for October with 949 condos sold, which is a 9.3% increase from the previous year. Median sale prices for condominiums reached $575,000, which is an all-time high for October and a 4.6% increase from the previous year.
Multi-family homes are the only property type not breaking all-time sales records for the area, although numbers are still on the rise from the previous year with 198 homes sold, a 6.4% increase from October 2019. Housing inventory is hitting record lows in many parts of the country with the older Millennial generation starting to purchase property in lieu of renting and many people leaving urban areas for suburban ones. However, it’s interesting to note that while the inventory for single-family homes in the greater Boston area has reached a 5-year low, condominium inventory reached a 5-year high, highlighting that people are looking for more space and distance from others in their living situations.
Boston Metro Housing By The Numbers
The homes in Boston proper are seeing slightly reduced numbers in terms of total sales and median sale price while nearby towns are on the rise, likely due to the population shifting away from urban to suburban living. That said, Boston remains a healthy real estate market for non-rental property. According to Redfin, the average homes in Boston are selling for approximately 1% below asking price and remain on the market for an average of 23 days. The more desirable homes in the area sell for approximately 2% above listing price and are on market for an average of 15 days. The median sale price for Boston homes is currently $695,000 which is a very slight decrease from 2019, less than a one percent difference. On average, homes for sale in Boston receive three offers before being sold, giving sellers a healthy level of bargaining room for their final sale prices.
The imbalance of supply and demand still has the city in a seller’s market, although the areas just outside of Boston and beyond are experiencing more gains and better profits for short-term real estate investments. For example, nearby Medford has seen a nearly 5% increase in home sale prices from the previous year, with homes selling at an average of $618,000 and spending 19 days on the market. The bargaining room is much better for sellers in Medford as well, with the properties receiving an average of seven offers before final sale. Meanwhile the nearby town of Newton has exploded throughout 2020, experiencing a nearly 23% increase in the average home sale price from the previous year for an average $1.1 million sale price. These homes are typically on the market for 23 days and only receive two offers on average, but 112 homes were sold in October 2020.
Rental Vacancies Increasing
With COVID changing the way people work and live, major cities like Boston are seeing large population decreases with suburban areas becoming more desirable. Since the city and its surrounding metro area rely on rental property, the greater Boston area is experiencing a surge in its rental property vacancy rate. Rental price increases have pushed and pulled the rental occupancy of the area over the years, but in 2019 the vacancy rate for the greater Boston area dropped to approximately 4.5%. As of October 2020, the vacancy rate has skyrocketed to approximately 7.3%! Different parts of the area are being affected in different proportions, with Boston proper being affected the most. For example, In Q3 of 2020, downtown Boston experienced a 6.3% increase in vacant rental property compared to Q3 of 2019, accounting for approximately 3,700 vacant properties.
The same level of rental vacancy is not occurring throughout the rest of Massachusetts, highlighting that these vacancies are a city issue rather than a state issue. For example, the greater Worcester area has filled the majority of their rental property vacancies, dropping from over 5% vacancy rate down to a little over 3% and continuing to trickle downwards. For people in Massachusetts that prefer renting or purchasing a home is not economically viable for them, rental property is continuing to thrive. However, the cramped spaces and high prices that comes with rental property in the greater Boston area are trending negatively, currently making it a tricky investment for someone’s rental portfolio.
Final Thoughts
After examining the data, it seems like the greater Boston area is currently a seller’s market that favors short-term real estate investments over long-term buy and holds. While the market has become increasingly competitive throughout 2020, there is money to be made in the area with fix and flips as well as new construction. Asset Based Lending is continuing to see our borrowers take advantage of this seller’s market by using our streamlined lending process, allowing them to close deals quickly and edge out the growing competition. With our flexible underwriting and professional draw management team, ABL is ready to help quickly finance your next real estate investment and keep your project running smoothly. If you’re looking for a hard money loan for new construction or fix and flips in the greater Boston area, contact us today.