Best Places to Live 2013: Market Snapshot
It's a battle out there. Donâ€™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. â€śItâ€™s almost like free money,â€ť says Michael DiMella, president-elect of the Greater Boston Association of Realtors. â€śYou 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,â€ť 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. â€śAnywhere that someone could buy it and rent it for a profit, youâ€™re seeing bubble activity that wasnâ€™t there a year ago,â€ť says Rona Fischman, of 4 Buyers Real Estate.
Confidence Is Up
We didnâ€™t take the same hit in our housing market as the rest of the country after the â€™08 crash. â€śIn Boston we saw very few foreclosures,â€ť says Ken Tutunjian, whoâ€™s spent more than two decades in Coldwell Bankerâ€™s Back Bay office. â€śWe were never part of that market.â€ť Our bubble didnâ€™t burst, in other words, it sort of deflated. And now itâ€™s begun to reinflate, thanks to an influx of international buyers, parents buying condos for their children, and empty-nesters looking to downsize.
(Click to view larger.)
Inventory Is Scarce
If thereâ€™s one word thatâ€™s keeping real estate agents up at night, itâ€™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. â€śLow inventory right now is essentially the only thing holding the market from being even busier than it is,â€ť DiMella says. â€śPlaces 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.â€ť Agents say theyâ€™re even seeing people forgo essential safeguardsâ€”things like mortgage and inspection contingenciesâ€”to close a deal. But patient buyers may luck out: â€śSellers are freaking if something isnâ€™t selling in two or three weeks,â€ť Fischman says, noting that this opens the door for negotiation. â€śBecause the marketâ€™s hot, itâ€™s cutting both ways.â€ť
Graphics by Lâ€™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.
Source URL: http://www.bostonmagazine.com/news/article/2013/02/26/boston-real-estate-market-2013/