Boston Real Estate Market: Housing, Buying and Investing

The Boston real estate market has been through a lot since 2020. It’s seen fluctuations in property costs, rental rates and nearly every metric you could imagine. Things started to level off a bit in 2022, but what does that mean for buyers and sellers?

Whether you’re looking for a place to live, trying to sell or deciding whether or not to invest, here’s what you need to know about the Boston real estate market.

Boston housing market trends

Boston real estate prices are up, but sales are cooling down. The median sale price in October 2022 was $629,000, up 4.8% from the same month the previous year. The difference is even more significant when compared to pre-pandemic levels. In October 2019, for instance, the median Boston home sold for $485,000.

As prices have risen, fewer properties have sold. Data shows that 3,426 homes were sold in October 2022—more than 1,000 fewer than the year prior. The lag time from listing to sale hasn’t changed significantly, however. Since early 2020, the average time on the Boston real estate market has ranged from 16 to 22 days, with very few exceptions. That’s about half the national average of 42 days, indicating a more competitive buyer environment.

The same competitive atmosphere also applies to pricing. Competitiveness has increased significantly since the height of the pandemic. For example, in December 2020, Boston properties sold for 100.8% of listing prices. If you listed a home at $500,000, you could expect it to sell for around $504,000. In May 2022, the average selling price was 106.3% of the listing price—$31,500 above the listing on a $500,000 home.

Still, that average may hide more variability than it seems. According to a Redfin report, 158 homes sold for more than $100,000 above their asking price in the first six weeks of 2022. This puts Boston in the top 10 cities nationwide for bidding wars.

Are housing prices dropping in Boston?

In the Boston housing market, prices are going up in the longer term but dropping in the short term. Housing data shows a consistent year-over-year (YOY) increase in sale prices, though that increase is about half of what it was from December 2020 to December 2021, suggesting a stabilization of prices after COVID lockdowns.

Month-to-month, median sale prices have been decreasing since July 2022. Before that, prices were on an upward trajectory starting in mid-2021, though with plenty of bumps along the way. It’s difficult to tell whether the downward price trajectory will continue.

Supply has also dropped recently, making things more difficult for buyers. Nearly every month of 2022 saw a YOY decrease in inventory. The sole exceptions were June and July, with YOY increases below 2%. We’ll have to wait to see whether inventory ever rises to 2019 levels, when YOY increases were regularly in the double digits.

Right now, Boston is still a seller’s market, but it’s a delicate balance. Things may change in late winter and early spring, when new listings tend to increase month-over-month. However, shifting economic conditions make predictions difficult.

Boston rental market trends

Rent prices are on the upswing in Boston, increasing by 5.1% over the past year. According to a recent report from Apartment List, the current median rent in Boston is $2,030 for a one-bedroom, and $2,116 for a two-bedroom.

The return of residents and office workers to Boston after the pandemic shutdown correlates with a jump in housing demand, presenting itself as a rent spike. Zumper data shows an eight-year pricing low in January 2021. After that date—one month after the first COVID-19 vaccine received emergency approval for public use—rents began spiking in the Boston area.

Local news channel WCVB-5 refers to these fluctuations as the city’s “pandemic roller coaster.” Tenants left the city in droves during the lockdown, then began coming back as quickly as they departed. But things appear to be leveling off. After an 18.3% decrease in median rent in 2020 and a 25% increase in 2021, 2022’s January-to-December shift closely parallels what it was in 2019.

Prices are higher than they were pre-pandemic, but there have been some fluctuations. Both Zumper and Apartment List show slight decreases over the past few months.

These changes make it difficult to predict what rental prices will do over the next year. The uncertainty is tough on renters and investors, especially since the real estate market in Boston was reliably strong before the pandemic.

Renters are more vulnerable to market changes, given the short-term nature of their needs. Investors can get ahead by playing the long game and buying strategically in the right neighborhoods.

Where to buy in Boston

In this kind of Boston real estate market, it’s difficult to pin down the “right” neighborhood to buy. Here are some Boston neighborhoods with potential:

South Boston

The city’s most popular neighborhood is South Boston, which had 891 sales in 2021, according to WickedLocal. In December 2022, the median home price in that area was $855,000, but the range is broad. The most expensive property of the second quarter of 2021 went for $12 million.

The average South Boston property takes 34 days from listing to pending sale, ultimately closing for 97% of the listing price. Depending on where prices go, this could mean profit potential for investors.

In the short term, South Boston generates solid rental income. Rents hit an all-time high of $2,990 for non-luxury apartments in early 2022. This translates to an 8.5% YOY increase and puts South Boston among the 10 highest-rent neighborhoods citywide.

This neighborhood also has a low vacancy rate and less fluctuation in occupancy. While other areas had a vacancy rate above 13% at the height of the pandemic, South Boston peaked at just 4%. That’s good news for investors looking to minimize their variability.

Bay Village, South End

Nearby Bay Village in the South End is also booming. It was the second hottest Boston housing market last year, with 728 total sales and a year-over-year price increase of 197.4%.

As of late 2022, prices are close to an all-time high, at $2.9 million. The neighborhood saw 17 home sales in October alone—nearly triple the number of sales in the same month a year before. It’s an extremely competitive market with just 18 days from listing to sale.

Rents are also soaring in Bay Village. Boston Pads puts the neighborhood’s average rent at $2,741 for a one-bedroom, a year-over-year increase of more than 10%.

The neighborhood also has an extremely low vacancy rate. Boston Pads’s Real-Time Availability Rate (RTAR) was 0% at the time of this writing, compared to 0.8% citywide. The zero RTAR makes it difficult to calculate the rental market turnaround, but it’s very promising for residential multifamily investors.

East Boston

East Boston isn’t quite as hot as Bay Village and South Boston, but some buyers may appreciate the lower level of competitiveness. Sales volume is slightly down from 2021 in this area, but sales volume is still the third-highest citywide.

Prices are down 3.9% year-over-year, selling for a median of $650,000. The average East Boston home sells for 1% below the listing price, an advantage for investors seeking to enter low.

The downside for rental investors in East Boston is the availability and vacancy rates, both of which are above the citywide average at the time of this writing. Vacancies and availability have both decreased since last year; however, so there is some hope, especially in the long term.

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Where not to buy in Boston

Some neighborhoods are not as desirable for buyers and renters. They have higher-than-average crime rates and lower livability scores, based on factors like employment levels and school quality.

Roxbury

Roxbury is one of Boston’s most dangerous and undesirable neighborhoods. In 2020, crime rates were 93% higher than the citywide average, earning the neighborhood an “F” rating on AreaVibes.

Crime rates in Roxbury are close to double the citywide average and three the state average, based on AreaVibes estimates. That includes violent and property crimes.

Roxbury’s livability score is a “poor” 53%—lower than 86% of neighborhoods. The unemployment rate is high and median home values are 20% lower than the state median. School test scores and graduation rates are also low, making the neighborhood unattractive to family buyers and renters.

Mattapan

Mattapan’s crime rates are slightly lower than Roxbury’s, but still much higher than the citywide average. In 2020, AreaVibes used local law-enforcement data to estimate an annual violent-crime rate of 913 per 100,000 people, compared to 607 per 100,000 citywide. Property crimes came in at 2,325 per 100,000 people, compared to 1,759 citywide.

Mattapan scores even lower for livability than Roxbury. Housing values are 30% below the state average, while unemployment is 80% higher than the national average. It’s a difficult place to live and a tough area to find qualified renters.

North Dorchester

North Dorchester ranks as less livable than 91% of Boston neighborhoods. The cost of living is high—4% higher than the state average and 36% higher than the national average—yet household income is 21% lower than the state average.

Home value is a bit higher than elsewhere in Massachusetts, but so is the cost of living. Household income has trouble keeping up—a trend that increases the risk for property owners.

North Dorchester also has high crime rates, though not as elevated as Roxbury and Mattapan. Again, using data from 2020, violent-crime rates were estimated at 747 per 100,000 people and property crimes were 2,744 per 100,000.

Who’s buying in Boston?

The Boston real estate market is popular with buyers of all stripes, with couples in middle age making up the bulk of residential transactions. According to data from the National Association of Realtors, the average Massachusetts homebuyer is 45 years old. First-time buyers average 33 years old, compared to 56 for repeat buyers.

In 2021, married couples made up the bulk of Massachusetts homebuyers at 63%, while single females and unmarried couples each bought 14% of homes. Single men bought only 7% of properties.

The investor demographic is as wide as ever.

“It’s everyone,” said Dave Monheit, president and principal broker of Encore Realty in Brookline, Massachusetts. “The only slowdown comes from either very large developers finding it harder to hunt down deals large enough for their investment groups, or sellers who haven’t come to terms that they missed the peak.”

Monheit believes both groups of investors—large developers and regretful sellers—will return to their previous activity levels “much sooner than most predict.”

Boston real estate: Should you invest?

Given volatile economic conditions, it’s understandable that investors might be questioning whether or not to buy.

“The Greater Boston real estate market has seen unprecedented growth for almost a decade,” Moneheit said. “Because of that growth, some investors and developers had stopped forecasting far enough ahead and had started to believe that the market was truly invincible.”

Considerations before investing

“We may be looking at uncertain short-term returns, but the long game remains the same and real estate isn’t a playing field for the short-sighted,” said Monheit. “Risk is inherently part of any investment and, balanced properly, the means by which we leverage our capital.”

Investors need to research and use their connections to find the right opportunity. They need to look at the data presented above, thinking about which types of investments align best with their individual goals.

For example, do you need short-term rental income or a property that’s likely to appreciate? Your answer will tell you whether you should look more at year-over-year or five-year data.

Is now a good time to invest?

Thanks to the large and diverse rental market, Boston is promising for real estate investors. Renters have returned to the city after the pandemic-induced mass exodus of 2020, driving a significant increase in demand.

Availability rates have dropped from an all-time high of 13% in 2020 to just 3.38%—a 68.5% year-over-year decrease and 32% lower than in June 2019. For renters, that means a third less inventory compared to the pre-COVID Boston housing market.

High demand continues to keep rent near record levels. It’s difficult to predict whether those numbers will stay high, but that may be the case for a while.

What do the experts say?

“Is it a good time to invest? Of course,” Moneheit said.”Should you be questioning yourself? Absolutely. Those were always two sides of the same coin, we just forgot we were flipping it.”

He advises investors to use all available resources. “Make calculated decisions and never be afraid to ask for advice, especially if you are newer to the market,” he said. There are never any promises in real estate investing, but the Boston market has proven resilient.

“A reality check every so often isn’t necessarily a bad thing,” Moneheit said. “Without risk, we have no opportunity. We simply needed that reminder, and thankfully the strength of Boston’s real estate market made that message a little bit easier to hear.”