It’s been 7-9 years since the last real estate downturn. Since 2014, many have speculated that we were in a bubble and that Boston real estate should crash soon. In fact, in 2014 some have predicted there would be a crash in 2015. The market didn’t crash in 2015. In 2015 many have talked about a crash in 2016. In 2016 the market didn’t crash either. And in 2016 even more have speculated a crash in 2017. And in 2017 buying activities have been stronger than ever. Each year the market became more competitive than the last.
As we have seen, between 2014 and 2017 real estate appreciation has been strong, although 2016 and 2017 growth has slowed. 2017 is yet another year of hot real estate market, despite the feds promising interest rates hikes. In many metro areas in Cambridge, Somerville and downtown Boston, we see even higher number of bidders, and even fiercer bidding wars than even 2016. Each year the same story of high demand and low inventory persist despite speculations of downturn.
So the question is, is it good to invest in Boston real estate now?
The truth is, whether you are an investor with 30-year experience or an economist, no one can really predict the real estate market. That’s why as real estate professionals we don’t make predictions about the future (and beware of those agents that do in order to make a sale). We point out historical trends and analyze data to help consumers make wise decisions.
Here are some important facts:
Between 2015 and 2017 Boston real estate was at an all time high. I have personally invested $3 million worth of Boston real estate in that time frame alone. No doubt many purchases between 2015 and 2017 were some of the priciest purchases in real estate history the area has ever seen. But let’s look at the historical trends. Neighborhoods such as Back Bay, Fenway, Brookline and Cambridge have been very robust during the recession. These neighborhoods have such high demands and such low inventory, that they were almost not affected by the recessions at all, not to mention the strong student population that boosted the rental market. Lands are scarce, and the scarcity drives the demand. Developments simply could not catch up with the high number of high-income individuals seeking to be close to the city. Further more, it’s hard to argue that academic institutions such as Harvard, MIT, Northeastern, Berklee, or Boston University would go bankrupt, even in the worst economy. Boston is a unique real estate market nation-wide indeed due to the strong job market, many clusters of higher academic institutions, and the robust biotech industries. Not only do institutions like Harvard or MIT attract elite buyers from all over the world, the biotech expansions such as Kendall Square developments continue to draw out-of-state employees.
Available data suggests that the pricing trends in these areas have moved steadily upward in the past 20 years. Even during the housing downturn, the prices stayed flat, but barely went down. In contrast, neighborhoods that are further out from metro center, such as East Boston or Dorchester, have seen greater downward price movements during the recession. Some neighborhoods that were not close to transit centers at all even went down as much as 30%. Many neighborhoods haven’t even recovered from the last crash.
Needless to say, the robustness of a real estate market has everything to do with the demand, job growth, education centers, and the economic strength of the area. In neighborhoods where the pricing has shown steady upward movement historically, anytime is a good time to buy and hold as long as the plan is to keep the properties long-term. Many international buyers view the Greater Boston metro as a safe haven to park their cash for this reason. Generally, within 10-15 minute walk to the T is a safe rule-of-thumb.
If you need free real estate advice or suggestions about how to best plan your investment, . I am always glad to chat! Feel free to comment below or talk to me about any questions.