While some market predictions are accurate, many are not. It is commonly heard that the housing market is nearing it’s peak, but Founding Partner of Charlesgate Realty, P.T. Vineburgh believes otherwise. Read below as he debunks what you have been hearing about the future state of the Boston real estate market and offers some insightful predictions of his own.
2019 will be an interesting year for the Boston real estate market. Media outlets and “experts” fall into the trap of making blanket statements and overly generalizing macro trends in what in reality is a hyper local and highly segmented market. In fairness, if you only have a “1/4 page” or a “column” (to use some old school journalism terms) to encapsulate a market, then often times there is little choice but to blend data together that candidly has no business being intertwined. That being said, what we do is extract relevant data into the correct buckets, so we can accurately look at each specific sub market. That being said, in our primary areas of focus (Greater Boston) this is what I see for 2019:
Rising rates will have some marginal impact, but they are not the driving factor on where the market will go. We are not in a highly rate sensitive market for the end users, as the average price in most Downtown Boston neighborhoods are in the $700K-$1M+ range. This also applies to new product in historically less expensive sub-markets like Allston/Brighton, Eastie, Southie, and Charlestown. This pool of buyers is not significantly impacted by a 1/4-1/2% fluctuation in rates. In a rising rate environment the 5/7/10-1 ARMS also start to become more common, and typically satisfy the rate concern for most buyers. Rising rates can tend to impact overall consumer confidence, so there is some collateral damage if on a national level (where rising rates are more significant) this becomes a constant talking point and that bleeds into the psyche of our local buyers. Also, it’s worth noting that the investment market will see a leveling of prices, as rates do have more impact for people buying multi-unit properties and those sellers looking to unload investment assets or development opportunities will need to re-calibrate expectations a bit.
In the general sales market days on market will increase and prices will not be going up 7-10% in 2019. Sellers will need to realize that things may take a little longer and the run up of +-10%/year appreciation that we have seen (citywide up 92% from Q1 2011-Q3 2018 according to LINK) is winding down. That being said, I do not foresee prices declining, specifically top tier product in top tier locations.
New construction condos in general, and particularly in up and coming sub-markets (Allston/Brighton, Eastie, Southie, et al) should remain very competitive. Older inventory, especially that which is needing renovating, will lag on market and need to be discounted.
I would not want to be putting up ultra luxury apartments in 2019 and beyond, especially in B sub-markets. Land and construction costs have soared, inventory for this market segment has increased overall, much of it concentrated in what the market perceives as superior locations like Seaport, South End, Fenway, et al, . Thus, ultra luxury product at the top of the market in terms of price, in historically “B” locations will be a challenge to get top dollar.
Big picture, Boston is well positioned, and in some respects insulated (relatively speaking) compared to other major metropolitan markets. We have a lack of raw land that can be developed, a lengthy and often cumbersome zoning process that doe snot seem to promote or want height/density, strong core industries that drive the local economy (education, medicine, biotech, finance) and an overall lack of housing supply. All that being said, though many feel that the national housing cycle is nearing its peak, I think there is still some excellent runway for Boston into 2019 and beyond.
Want to learn more or have a conversation with P.T.? Contact him here.