Living in Boston means access to a diverse and intellectually vibrant metro area. Even more appealing is the notion that buying a home in Boston doesn’t carry quite the financial sting that it does elsewhere. With a citywide average selling price of $545,000, Boston appears undervalued in today’s market when compared with other metro areas such as San Francisco or Manhattan where homes have an average selling price of $1.3 million and $1.77 million, respectively.
However, if you assume that makes Boston a pure buyer’s market, think again. The specifics of the city’s housing environment mandate thoughtful shopping and a willingness to act quickly.
Limited Housing Supply
Having been settled since 1620 and with the Atlantic Ocean on one side, not much space remains to be built out. That limits the number of homes available for sale, particularly single family housing inventory (down 13 percent from a year ago, according to the Greater Boston Association of Realtors).
Overseas interest has further tightened an already competitive market. International buyers are active in buying high-end luxury properties, both for personal occupancy and investment purposes. The city’s many colleges and universities help make Boston attractive for rental investment or alternative housing for buyers’ children.
The limited housing supply in Boston has created an exceedingly competitive, fast moving market. Competitive multiple-offer situations, properties selling for well beyond asking prices, cash offers and contingency-free purchases are becoming increasingly commonplace. Local real estate authorities are also seeing an uptick in “off-market” transactions—sales of homes in which a broker contacts a homeowner who may have no immediate interest in selling and telling them they have a cash buyer ready to move.
Readying Yourself for the Boston Market
This market requires a thoughtful, yet aggressive approach for those considering a home purchase in the Boston metropolitan area. A good initial step is to establish a relationship with a broker experienced in the dynamics of the local market as well as its idiosyncrasies. Case in point: Massachusetts has an unusual two-step closing procedure, consisting of an accepted offer followed by a purchase and sale agreement. While an accepted offer typically requires a $1,000 deposit, experienced brokers often urge clients to put down as much as 10 percent of the purchase price to better the chances of the sale concluding quickly and effectively.
An experienced broker can also introduce buyers to areas of the city that, up until recently, generated little buyer interest. One such location is midtown Boston—once solely comprised of office space but it is now increasingly geared towards residential. Readily accessible public transportation and the appeal of neighborhood “walkability” are two factors driving interest in midtown.
Another is Boston’s move to buck a longstanding housing trend through the construction of luxury towers. One ongoing project is Millennium Tower—under construction at the location of the old Filene’s department store—as well as the planned Four Seasons Tower in the city’s Back Bay neighborhood. Prices will be in line with both the surrounding neighborhood and striking views of the city. Millennium Tower’s top penthouse is expected to command $35 million and move Boston into the luxury tower environment long occupied by New York, Los Angeles, San Francisco and other cities. It will also serve to diversify the variety of housing choices available to Boston metro home shoppers in terms of location, price and, possibly, the speed with which buyers need to move to pursue an attractive opportunity.
But, in the meantime, be ready to make a quick decision if you come across a home you love. A buyer who is able to come to a purchase decision quickly will find more success in the Boston market than others who are more deliberate. Some may even make an offer during a home’s initial open house. The old saying holds true in Boston: “Sleep on it and you’ll never sleep in it.”