Land of the Bean and Cod, Market of the Triple-Decker
David Bates / June 18, 2012-11:11 am
Last August I thought I saw the Boston rental market take a steroid. The buyer of a Back Bay studio asked my firm to list if for rent in September at $1750. It had been receiving $1200 a month in rent. There was a weekday rental open house, three applications were submitted and it rented for $1800. I have been through a lot of good rental markets. This one was different. This market, I thought, was ‘on the juice.’
With the enthusiasm of recommending a good movie, I heard agents calling condominium owners and telling them how they could make a lot of money: rent your condo! In some cases, condos that had languished seemingly forever on the sales market, were quickly devoured by the rental market. I saw development plans for luxury condominiums become development plans for luxury rentals. And I sensed that a condominium at the Ritz Carlton which had been rented for $30,000 a month, was perhaps the highest rental ever in Boston. All the while, I quietly wondered what impact the increasing rents would have on the Boston 2-4 Family Market.
In July 2011, I had posted that first half of the year sales of Boston 2-4 Family unit buildings had been the worst in 14 years of MLS reporting. Would a rent-crazy Boston change the small multifamily market? If its investors took Harold Brown’s lead, they would. In October, the 86-year old Boston investor proclaimed an end of the Boston housing recession. In November, his company announced plans to build apartment towers in Malden and Downtown Crossing.
Recently, my quick survey of Boston 2-4 Family Buildings under agreements for the first five months of 2012, shows prospective transactions are up 23%. Median list prices for those properties are up 3% ($345K). As for the health of today’s 2-4 Family market, granted, it’s not like 2005 — when the thought that you couldn’t lose in real estate provoked buyers in the first five months of the year to put more than 500 Boston 2-4 Families under agreement at a median list price in excess of $500K. But then again, it’s not like 2009 either, when the glut of distressed properties dropped the city’s median sales price of 2-4 family buildings to $250K. At a time when many prefer to rent rather than buy, the fact that we live in one of the great rental cities means I expect the upward trend in income properties to continue. For some general overview numbers for this market, check out my previous post on “Comparing Boston Income Properties.”