Best Places to Live 2013: Market Snapshot
It’s a battle out there. Don’t believe it? Here’s a look at the forces behind Boston’s suddenly red-hot real estate market.
Interest Rates Are Low
Much of the hustle-bustle right now stems from historically low interest rates, which for the past year have hovered around 3.5 percent for a 30-year mortgage. “It’s almost like free money,” says Michael DiMella, president-elect of the Greater Boston Association of Realtors. “You can make an argument that there will never be a time in our lives when it will be so cheap to borrow from a bank,” adds Brian Cavanaugh, a mortgage broker with Residential Mortgage Services. Both Cavanaugh and DiMella predict that rates will remain low for the next six months to a year.
Rents Are High
Boston rents jumped 6.4 percent in the past year, according to the real estate website Trulia. For many renters, it now makes financial sense to buy instead. But with the inventory crunch, prospective buyers are bidding not just against one another but also against savvy developers, who are snatching up multifamily properties for quick flip jobs or buying condos and renting them out. “Anywhere that someone could buy it and rent it for a profit, you’re seeing bubble activity that wasn’t there a year ago,” says Rona Fischman, of 4 Buyers Real Estate.
Confidence Is Up
We didn’t take the same hit in our housing market as the rest of the country after the ’08 crash. “In Boston we saw very few foreclosures,” says Ken Tutunjian, who’s spent more than two decades in Coldwell Banker’s Back Bay office. “We were never part of that market.” Our bubble didn’t burst, in other words, it sort of deflated. And now it’s begun to reinflate, thanks to an influx of international buyers, parents buying condos for their children, and empty-nesters looking to downsize.
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Inventory Is Scarce
If there’s one word that’s keeping real estate agents up at night, it’s inventory. They have clients who are itching to buy, but nothing to show them. Local markets are operating like chummed-up shark pools, with multiple bids on subpar properties. “Low inventory right now is essentially the only thing holding the market from being even busier than it is,” DiMella says. “Places are coming on the market for more than they would have six months or a year ago, and demand is outpacing supply right now at almost all price points.” Agents say they’re even seeing people forgo essential safeguards—things like mortgage and inspection contingencies—to close a deal. But patient buyers may luck out: “Sellers are freaking if something isn’t selling in two or three weeks,” Fischman says, noting that this opens the door for negotiation. “Because the market’s hot, it’s cutting both ways.”
Graphics by L’Atelier Starno. Sources: The Warren Group (home sales), Zillow (rent), Freddie Mac (mortgage), Greater Boston Association of Realtors (inventory)
Check out all of our Best Places to Live 2013 coverage.