Has COVID-19 revealed a long suspected economic driver of housing prices in Boston?

As the world began grappling with the COVID-19 pandemic, many began to wonder what the economic fallout would be as businesses around the nation closed in an attempt to stop the spread of the virus. As large and small sectors of the economy ground to a halt, the likelihood of another economic recession became more and more imminent. While there’s little doubt that we are currently experiencing a recession, we still do not know what the future holds for a recovery or what the lasting economic impact will be.

Experts Weigh In on Post-COVID Housing Market

Despite the obvious slow down in real estate market, experts are quite optimistic that the real estate market will pick right back up once COVID-19 resolves, especially in a market like Boston. With an already limited housing supply, experts also don’t expect a big dip in housing prices either. “Once the economy can return to normal, and people can get back to normal, I think the fundamental shortage of homes will still be there. That’s why I don’t see much prospect for prices to fall very far as a consequence of this,” said Jeff Tucker, a Zillow economist.

In the meantime, real estate agents are getting creative with virtual tours and other ways of “showing” properties with prospective buyers and tenants and the City of Boston has created a fund to help tenants pay rent. For more details about the current and future housing market, click here.

Will COVID-19 Affect the Housing Market?

There is a lot of speculation as to what may happen to the housing market in the wake of the COVID-19 pandemic. After the 2008 recession, it is easy to imagine a similar scenario where housing prices drop drastically and properties sell for a fraction of what they were valued at prior to the recession. However, there is a major difference between the 2008 recession and the potential recession caused by coronavirus, as explained in a recent Curbed article — the 2008 recession was caused by the collapse of the housing market, whereas coronavirus is causing many markets to essentially freeze until further notice. So, what can we expect to happen? Ultimately, we agree with the author’s main conclusion - it’s too soon to tell what the effects of COVID-19 will be on the housing market, but click here to read through a few scenarios you may find yourself in if there is a recession.

Has Newton's Community Process Gone Too Far?

Voters in Newton recently approved a 23-acre mixed use project that will provide 800 units of housing, as well as office space and retail space. The project was originally approved by the Newton City Council in a 17-7 vote, but a group in opposition of the project lobbied that the project’s fate should be voted on by town residents. Ultimately, the project was voted on and approved, partly in thanks to a group that rallied in support of the project. But we are left wondering if this is a case of community involvement gone too far as Greater Boston (and many other places in the country) is faced with a severe housing shortage. Read more about this case here.

Will Boston Follow New York's Lead and Ban Broker Fees?

There was big news coming out of the New York real estate market this week - the New York Department of State clarified a previous regulation stating that brokers can no longer charge rental tenants a “broker fee” if they are hired by a landlord to market the rental unit. Instead, the landlord must cover the broker fee. The only case in which a broker fee applies to the tenant is if they personally hire an agent to help them find a rental apartment. The repercussions of such a shift in who will the broker could be manifold. Some suspect that landlords will just raise rent to cover this added expense for them. Others say this will have a positive effect on tenant’s ability to move because their expenses in doing so will be less.

Co-Working Space Expansion Stalled in Boston - Is It for Good?

In the second half of 2019, very few new co-working spaces opened in Boston and the surrounding areas. This halt in the expansion of new co-working spaces was in lockstep with WeWork’s botched public offering after it lost $1.25 billion in three months. Despite many of the well-known co-working companies (think WeWork, Industrious, Workbar) saying Boston is a key market for their business, there are still only one or two plans to open new spaces in the coming months, according to a recent Boston Globe article. What do you think will happen with co-working spaces in the future?

The Real Holdup with Solving Boston's Housing Shortage

Last week, we wrote about Mayor Walsh’s vision for the next decade, particularly how he plans to add housing units to the city with the goal of making it more affordable for working people. Interestingly, this article from the Boston Business Journal reports that Governor Baker put a bill before the state legislature more than 8 months ago that would make it easier to rezone areas for housing. This bill would greatly help Mayor Walsh move forward on his housing plans for the city, so it’s time our state legislators get behind these visions.

BPDA's Housing Vision for the Next Decade

As we start a new decade, Mayor Walsh and the director of the Boston Planning and Development Agency, Brian Golden, are making big plans to continue to develop Boston’s housing stock. It is estimated that Boston’s population will grow to 760,000 in the next decade which means there is a need for more housing across all income levels. Through a community engagement process, the BPDA is focusing on working with Bostonians to create more appropriate housing in “East Boston, Mattapan, Glover’s Corner, Downtown, Newmarket, Allston-Brighton, and Charlestown,” which are neighborhoods the city has identified as areas that will shape future growth. Those neighborhoods are in addition to “Dorchester Avenue in South Boston, Nubian Square (formerly known as Dudley Square), and the Washington Street corridor in Jamaica Plain and Roxbury” where studies have already been completed. There are also initiatives to better connect Boston’s neighborhoods with improved transportation options which you can read more about here.

Are Lenders Justified in Being Wary of Modular Construction?

Any developer who has explored building a project modularly instead of on-site has likely run into trouble finding a lender to work with. In general, lenders are far less familiar with modular construction and therefore are hesitant to lend money for such projects despite the major benefits of projects being built faster and for less money. Compared to on-site construction, modular construction requires a lot of capital early on because both site work and modular building are happening simultaneously. Lenders are also wary of the risk involved in transporting the modules from the factory to the final site. For these reasons and more, lenders are not as willing to fund modular projects even though “modular construction could claim $130 billion worth of the combined U.S. and European construction markets by 2030.” Click here to read more about the lending climate for modular construction.

CambridgeSide Mall Will Get New Life

As retail stores have struggled in recent years, malls have become vacant leaving some to wonder what to do with the coveted space in overcrowded cities. One such mall, the CambridgeSide Mall, will get a new life, although it will take many years before the project will be complete. New England Development has reimagined the CambridgeSide Mall into a mixed-use building, and after receiving approval from the Cambridge City Council last week, they will be able to turn the space into office space, residential housing, and street-level retail. To find about more about the project, click here.

Boston's Boom Sparks Rise in Property Values

Ahead of the new year, the Boston Municipal Research Bureau is releasing a five-part series on Boston’s economic boom since 2013. The first report property values have hit a high of $164.5 billion in 2019, which is an increase of 78.4% since 2013. The city’s population has grown about 6% which is about 40,000 people. Rising property values, new construction of all types, the influx of people, and a strong business sector are all part of Boston’s boom. Click here to read more about which neighborhoods have seen the biggest growth in property values.

More New Construction Points to a Strong Housing Market

Multiple data indicators support the notion that the housing market is strong in the final quarter of the year. Housing starts increased 3.8%, single family new construction rose for the fifth straight month, and building permits rose another 5% in October. These numbers, along with more data you can find here, all indicate that the housing market is strong and builders are taking advantage of low interest to increase the housing stock.

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