Boston Real Estate Market Insights | May 2021

The sales market is still flying high in most areas with bidding wars becoming commonplace once again. Appreciation has been strong everywhere and many markets have seen gains in excess of 20% YoY. Half of the homes for sale last month sold above the asking price where the average sale price was 101.7% of the list price, and the median single-family home price topped $500,000 for the first time ever, according to Boston Agent Magazine. However, depending on the type of property and more importantly WHERE the property is located (location, location, location), will determine whether there are 14 offers before the first open house or just one (or none – yes, it’s possible).  

After a slight bump in interest rates earlier this year, rates came back down and appear to have stabilized for the time being. The low rates combined with the ubiquitous lack of inventory has continued to fuel the market, most notably in the suburbs but also within the city limits.  People have begun to flock back to the city as more businesses and restaurants open their doors to full capacity and the city gets back to a sense of “normalcy.”  South Boston and Seaport are leading the charge with new construction popping up everywhere and $/sqft prices breaking records every week.  This is due in part because of increased cost of materials which has a trickledown effect on existing housing stock.  That said, some buyers are starting to get weary of the constant bidding wars and afraid that the out-of-control appreciation will have a bubble effect in the not-too-distant future.  Some experts believe that the market may have peaked for the year, sighting decreases in pending sales and mortgage applications. This is another indicator that the market has normalized and could be headed into a seasonally typical summer lull as buyers and sellers head to the beaches and enjoy the short-lived New England summer. Either way, it seems likely that the market will continue to see major gains throughout the year and activity will surely increase again in the fall. 

After the rental market experienced a somewhat lackluster start to the year, February saw steady gains before the things really came alive in March and April with Metro posting the highest number of closed rentals since July of 2019. Optimism over increased vaccine usage, universities opening up to full classrooms, businesses and hospitality inching toward full capacity and a stable economy has resulted in a constant stream of renters returning to the city.  The influx of renters has had a stabilizing effect on the market which we expect will remain steady throughout the summer. However, there is still higher than normal inventory and many buildings are struggling to fill their vacancies which has necessitated many property managers to continue offering incentives to help move their inventory. We expect those incentives will start to dry up over the coming months as the inventory is absorbed and in some instances that trend has already begun. While many landlords are still having to pay fees to stay competitive with the larger buildings, property owners that are able to differentiate their apartments from the pack are seeing rental values reach levels not attained since 2019. This is a huge turn around from six months ago when rents were down between 10-20% YoY.  Those apartments that have been renovated with modern appliances and finishes continue to perform best and garner the highest level of attention from renters. Outdoor space is another high demand apartment feature but probably the most highly sought after and elusive amenity that renters desire is; in-unit laundry. When a new landlord recently asked what was the one thing they could do to ensure their apartment didn’t go vacant and were told to install in-unit laundry, the result was even better than expected. They ended up with a bidding war on the apartment when the first two customers who saw the unit applied on the spot. The landlord received $200/mo over the asking price which was even higher than the pre-pandemic value!

Three and four bedroom apartments continue to underperform and lag behind one and two bedroom inventory due primarily to pandemic induced roommate hesitancy. However, in a strange turn of events, studios which are usually the highest in-demand apartment due to their affordability have joined the ranks of their larger brethren in becoming the least desirable due to their inherent lack of living space.  This too could be attributed to pandemic related PTSD, as people are hesitant about living in such tight quarters for extended periods of time. Combining the pandemic induced claustrophobia with the newly “affordable” one and two bedroom inventory, has resulted in a higher than normal amount of studio inventory.  This is sure to change as the “affordable” inventory continues to be absorbed over the coming months and rents continue to stabilize toward pre-pandemic levels but for the time-being the studio and 3+ bedroom inventory is expected to lag behind the 1 and 2 bedroom markets, at least for the near future.  As we head into the summer, I have renewed confidence that the rental market will continue to rebound and by this time next year we are likely to see typical YoY rent increases – just not quite yet.  

If you’d like for Metro Realty to provide a free evaluation of the current market value for your property, please don’t hesitate to contact us anytime!