The Boston area has some of the highest home prices of any major American metro region. There are multiple reasons for this. (The region also has some of the nation’s highest residential rents. Here’s why that is.)
Perennially high demand. The Boston region’s population has been steadily swelling for around a decade, and as of late 2019 stands at nearly 4.9 million, give or take and depending on how you draw the regional boundaries. Blame/credit a strong local economy, immigration, and the area’s overall desirability.
A corollary to this is that, because demand is so strong and prices so high, generations tend to pass down housing in the Boston area more than in some other places. Houses therefore spend several decades or more essentially off the market.
Too little supply. The Boston area’s inventory of available homes has long failed to keep pace with this high demand. Despite a brisk pace of construction—particularly in Boston proper, where thousands of new condos have come online during the past decade—the need for housing continues to outstrip the supply.
Too little supply of the right kind of housing. For decades, several towns and cities in the Boston area leaned on zoning that prioritized smaller multifamily for-sale housing or single-family houses, hoovering up available parcels with structures that in the end would not shelter that many people.
Even in the City of Boston, larger-scale condo developments have historically been hard to come by. The very noteworthiness of the current building boom is proof of that.
Plenty of buyers who can afford the prices. This goes back to the first point. It’s not just population growth in the Boston region. It’s that many of these new residents make the kind of coinage that allows them to afford $700,000 one-bedrooms and $2.5 million colonials. Sometimes being one of the world’s economic engines has its drawbacks.
Horrid commutes. Commutes in and out of—and around—Boston have worsened in recent years, whether by car or public transit. The share of Boston-area commuters who travel more than 90 minutes to and from work increased 50.1 percent from 2005 to 2016, for instance.
Living that much closer to the workplace to offset some of this time-sucking awfulness has helped drive the demand for housing near core commercial areas that much higher.
High barriers of entry to the rental market. Hey, if the monthly costs of renting and owning are not all that different, why not take the plunge? That line of thinking has motivated more than a few buyers here.
History—a long, familiar history. Like just about every other sizable housing market in the U.S., myriad meta-trends and milestones influenced the evolution of the Boston area’s market to this super-expensive point.
These trends and events include the post-World War II suburban building boom; the so-called white flight of residents from urban areas to those fresher suburban digs; the real estate industry’s racist redlining approach (that government mandates often abetted); tax policy that favored (and favors) ownership over renting; and periods of cheap, cheap mortgage financing—such as the one we’re in now as the 2020s start, where mortgage rates are in the low to middle single digits.
Lack of longterm planning. See much of the above.