Boston – Following the most recent recession, the number of vacant apartments in the Greater Boston area reached an all-time high of 21,500 units. However, since mid-2009, the release of pent-up demand has resulted in a strong increase in absorptions (totaling 13,600 units) putting vacancies on a downward trajectory. Currently, the number of vacant apartments available for rent sits at 13,500 units, which is a touch below its historical average of 13,900.
With developers ramping up construction in early 2012, we expect a wave of new apartments totaling 11,400 units to make their way onto the market by the end of 2015. However, demand will continue to outstrip supply through to the end of 2014, keeping downward pressure on the vacancy rate. This pressure is unlikely to ease until 2015, when the estimated supply of new apartments (5,200 units) will be greater than our demographically driven estimate of renter.
Part of the reason why we’ve seen a surge in rentals reflects the fact that the cost of homeownership (as indicated by the median sales price) remains more than double the national average. The inventory of single-family homes (currently 2,802) has fallen by over 28% in the last year and supply is expected to remain tight over the near term.
This will keep home prices elevated and maintain interest On the condominium side, supply also remains tight.
According to the Greater Boston Association of Realtors, the inventory of existing condos currently sits at 514 units, which is down 31% from year ago levels. With very little new supply, prices have grown 12% year-over-year. Only 3,300 new units are expected to make their way onto the market by the end of 2015, which will fall short of estimates of an additional 4,600 potential buyers. Consequently, in spite of some mild offsetting influences stemming from the rental market, condo prices will continue to rise over the Tight supply of both detached and multifamily residences has for a long time been a constraint in the residential Boston market. This has resulted in rents growing by an average annual rate of 3.7%, while home prices have increased by double the pace of income growth.
In an effort to provide some relief, Mayor Thomas Menino recently announced a $16 billion housing plan that would bring an estimated 30,000 units of housing to the city of Boston by the year 2020. This plan is still in the early stages and many details still need to be ironed out, but there is no question that the plan, Housing Boston 2020, would be a positive for the metro’s multifamily sector.