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Which Boston neighborhoods will gentrify next?

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Here’s a good way to predict

It can be difficult to tell when a neighborhood is gentrifying (beyond when the first Starbucks moves in perhaps).

Yet, there are some metrics to follow to see if the transformation is happening, and real estate research site NeighborhoodX has followed them to this new analysis, which tracks the ratio between rents and prices in different Boston neighborhoods.

The higher the ratio between the two metrics, the more desirable the area in terms of demand for longer-term housing (and a rise in the demand for housing is as good a harbinger of gentrification as anything). That’s it in a nutshell.

To elaborate, we turn things over to NeighborhoodX co-founder Constantine Valhouli:

  • Purchase price per square foot gives a sense of what someone is willing to pay to own in a neighborhood. If people are willing to pay more to live in a neighborhood, it suggests that there is potential for housing prices or rents to increase, or that it is simply a very desirable place for an owner-occupant to live.
  • On the other hand, rent per square foot reflects current conditions for which someone is willing to pay for one year. Higher rents imply that an area is more desirable now; lower rents imply that a particular neighborhood may be a destination of necessity rather than choice.
  • The relationship (ratio) between the purchase price and the annual rent gives a sense of how many times the annual rent someone is willing to pay to own in this neighborhood.

So! A particularly high ratio—as in the case for neighborhoods such as Beacon Hill, Back Bay, and the South End—suggests a strong (or at least stronger) desire to live there longer-term (e.g., buy). In other words, the purchase price in Beacon Hill is 26.42 times the annual rent in the neighborhood.

A lower such ratio suggests a lack of desirability for ownership. That does not mean the neighborhood is better or worse in other respects—just that it is not particularly pricey and competitive housing-wise.

At least not yet. Check out the mid-range ratios that neighborhoods such as Dot, Hyde Park, Brighton, and Eastie are sporting. Those are your candidates for gentrification—or more gentrification, as the case may be.