MARKET BREAKDOWN
REGIONAL SPOTLIGHT: BOSTON, MA
below the national average, and in steady job growth and associated population growth in the region.The demand for housing in Boston and the extended area is higher than ever in 2018, and that has led to two compli- cations swiftly becoming pervasive national housing issues: housing availability and housing affordability. How the Bostonmar- ket responds to these issues will determine its health over the next 12 months and beyond, and real estate investors will play a significant role in this response. “Boston, as a city, has been unaffordable for quite some time because it has been one of the major U.S. municipalities for a very long time,” observed Cisterna. “It’s a very desirable area with a very educated workforce, but increases in home prices and rents continue to outpace income growth. A continued decline in unafford- ability levels in Boston should not be a surprise to any investor,” he added. According to Sperling, Boston scores a 169.90 on its cost of living index, where a score of 100 is “average” for the U.S., and numbers between 100 and 200 are relatively less affordable than the average city that might score a 100. For example, Honolulu, Hawaii, scored a 199.80 on the index, and Atlanta, Geor- gia, which is located in the relatively affordable southeastern United States, scored a 101.80. Investors should note that Sperling designates housing as the “biggest factor in the cost of living difference” for Boston. Boston is expensive, but this has not deterred people’s desire to move there. The environment is too attractive to resist. Major employers like General Electric, Amazon, Boston Scientific, and Gillette all have a large physical presence in the area to take advantage of the high- ly educated pool of potential employees. “Amazon recently procured 154,000 square feet in south Boston,” observed THE RIGHT INVENTORY IS THE KEY
MEET THE EXPERTS CITED IN THIS ARTICLE
retail environment like Boston, real estate investors began to get creative in 2017 to generate leads on deals that could be flipped or rented out for the skyrocketing rates. “If you were an investor trying to feed your business through the MLS and broker rela- tionships last year, then, in my opinion, you probably started to get hungry,” said Dave Seymour, a featured investor on A&E’s Flip- ping Boston for four seasons and currently a partner at Boston’s Garmour Group, which buys both single-family and multifamily properties, upgrades them, and then either sells the properties or rents them out. “We did (and are still doing) every- thing we could to stay outside what everyone else was doing to generate leads and do deals,” Seymour explained. “We ramped up our direct mail in 2017 so In Massachusetts, you have a 10-day window to get an inspection after making an offer, and on the tenth day, you sign the purchase- and-sale agreement. I am seeing folks make offers that include an agreement to waive the inspection, or that waive the right to adjust their offer unless there is a big, specific issue, such as a structural problem. It doesn’t mean that they’re not getting inspections necessarily, but it means they’re agreeing not to use the results of the inspection to try to bring down the price after the fact.” KRISTINWEEKLEY, Boston area Realtor
DAREN BLOMQUIST Senior Vice President, ATTOM Data Solutions
DENNIS CISTERNA CEO, Investability
SEAN CARPENTER President and CEO, Shamrock Development
DAVE SEYMOUR Managing Partner, Garmour Multifamily
Boston is home to acres of public parkland, including Boston Public Garden, the first public botanical garden in the United States.
KRISTINWEEKLEY Licensed Realtor, Laer Realty Partners
we could reach more motivated sellers, distressed assets, assets with no mortgag- es, out-of-state assets, owners who live out of state, anyone with a property we might want who might be reached before a dozen other investors get there." He added, “We’re seeing a really in- teresting trend for investors right now in 2018 where families who have owned ‘three-decker’ properties (a property with three identical units on three identical levels) for years are selling them off for a really nice profit, and then investors are upgrading and modernizing the units.Once the updates are done, they are selling each of those new condos to Boston professionals for about as much each as they paid for the property originally.” Seymour said this strat- egy is working particularly well in Boston
suburbs like Somerville, Massachusetts. With one of the strongest academic populations in the country, thanks to more than three dozen colleges, universities, medical schools, and community colleges in the area (see sidebar on p. 41), the city has long been a destination for higher learning. As a result, Boston also has had a strong, steady housing market sustained by well-heeled, professional homebuyers in relatively stable occupations. Even during the housing crash, Boston home values did not fall nearly as far as values did in other parts of the country. At the market’s peak in January 2006, the S&P/Case-Schiller MA-Boston Home Price Index posted a reading of 180.62. By April 2009, that value was 148.81, a fall of nearly 32 points. By comparison, San Francisco, California’s in-
dex reading fell by nearly three times that. Boston is home to another highly attractive population of residents as well: the STEM (science, technology, engineering, mathematics) population. In 2017, WalletHub dubbed Boston the second-best metro area in the country for STEM professionals based on annual median wage growth and job opportuni- ties. Boston trailed only Seattle, Wash- ington, on this list. Like the academic population and its associated systems of higher education, STEM professionals and the associated industries that court them provide a steadying force in the lo- cal economies where they are prevalent. This steadying force is demonstrated in the greater Boston area’s unemployment levels, for example, which routinely remain well
Carpenter, noting that many analysts place Boston among the frontrunners for Amazon’s highly coveted HQ2, which will change the landscape of its host city and the surrounding regional economy in substantial and permanent ways. Ama- zon placed the city on its finalists’ list in mid-January of this year. “Even if HQ2 doesn’t land here, Amazon is already contributing more than 20,000 jobs to our economy and has two international distri- bution hubs in the area,” he added. Cisterna warned, however, that even demand has a ceiling if the buying population slows down its acquisitions. This perspective is likely the reason many
38 | think realty magazine :: march 2018
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