Boston Housing Is Expensive—So What?

Boston photo via Shutterstock

Everyone’s talking about the high cost of housing in Boston these days. On Monday, City Councilor Josh Zakim convened a public hearing on the issue—and it took 4 1/2 hours before everyone in attendance had the opportunity to speak their minds. Last week, the Warren Group reported that condominium prices in Boston Proper* increased 19 percent between March 2013 and March 2014—in just one year—with the median-priced condo selling for $685,000. And Zillow analyzed the real estate market and discovered that in many Boston Metro cities and towns, the cost of buying a home is out of reach for the majority of residents who already live here.

In 2013, the median-priced single-family home in the city of Boston sold for $419,000 and the median-priced condo sold for $455,000—all-time highs, while the median household income for the entire city was around $53,136. This is an intimidating number because it means the typical Boston homebuyer is spending $19,000 (37 percent) of his/her income each year to own that single-family home and $21,500 (41 percent) each year to own that condo.

But blanket statistics such as these aren’t helpful on a practical level. “Median income” for the city includes the thousands of residents on public assistance, the millionaires on Beacon Hill, and everyone in between and homes sold in Boston run the gamut from studios in Mattapan to townhomes on Commonwealth Avenue. You don’t live in “Boston”; you live in a neighborhood.

Looking at the numbers on a neighborhood-by-neighborhood basis gives a clearer, more realistic idea of what’s going on where you live and where you want to live.

Below is a table of Boston neighborhoods and household median incomes of residents who live there. The third and fourth columns show what it might cost to buy a home today and how it would affect your wallet:

You can see that, even on a neighborhood level, doing this type of calculation has its limitations. Look at 02111 – Midtown / Chinatown, where you have millionaire homeowners in luxury towers rubbing up against low-income and poor immigrants who earn $12,000 in a good year. The incomes of both are included in the median income calculations, which is what throws off the number.

Still, this gives you a good idea of what you’re up against, say, if you’re looking to move into town and hoping to buy. For those who already live here and rent, the numbers may seem daunting, but at least breaking down the data by neighborhood gives you an idea of options available that you may have not considered previously.

Just a word about listing inventory: There’s been a dramatic decrease in the number of properties listed for sale in Boston (and, in many other cities). At the end of April 2009, there were 1,258 condos for sale in Boston Proper whereas as of today there are a total of 243—a drop of 80 percent. In the entire city, there are 588 condos currently listed for sale. In the past 30 days, 355 condos were sold. This means there’s about a month-and-a-half supply of condos for sale, whereas in a typical housing market you’d expect five to eight months of supply.

The effect of this is what you’d expect (if you ever sat through Econ 101): limited supply and strong demand leads to higher prices. Which is one of the primary reasons you’re seeing things such as that 19 percent increase in sales prices in just 12 months.

So, as a potential home buyer, you’re facing two very big problems: it costs a lot of money to buy a home in Boston … and there are but a few available to buy, anyway.

Really though, things aren’t that bleak. Inventory should increase over the coming months as homeowners realize they are sitting on a lot of equity, as they start considering changes in jobs and making life choices that will lead them to sell and move to larger (and smaller) homes or perhaps elsewhere. Meanwhile, building permits are on the rise, which means we’ll soon see new housing going up all around the city—and not just pricey condos along the Boston skyline.

There is a lot going on in Boston’s neighborhoods right now, and real estate and development are a big part of that. The cost of housing affects just about anything that happens, be it in business, politics, and our quality of life.

This is Boston in 2014. Let me show you around.

A few notes:

*I use the term “Boston Proper” a lot. It’s a short-cut way of talking about the neighborhoods closest to downtown including the Back Bay, Beacon Hill, West End, North End, Waterfront, Seaport District, Leather District, Chinatown, Midtown, Bay Village, South End, and Fenway neighborhoods.

**Income data from the 2008-2012 American Community Survey 5-Year Estimates, US Census Bureau. “Household Income” is the total income for anyone living under one roof: a single person, married couples, unmarried couples, roommates, a retiree, etc.

***A “home” is a single-family in Hyde Park, West Roxbury, Roslindale, and Mattapan and a condominium in all of Boston’s other neighborhoods, since that’s the type of property most-often bought and sold. There were approximately 4,707 condos and 1,010 single-family homes sold in Boston in 2013.

****Multiple Listing Service Property Information Network, Inc. data, collected from 3rd-party sources, for the period 4/30/13 – 4/30/14.

*****Estimated using a 20 percent down payment, 4.3 percent interest rate, 30-year fixed rate loan.