Will the Boston Housing Market Crash Anytime Soon?

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Market Growth and Sustainability

The Boston housing market has experienced significant growth over recent years. While it is true that this growth cannot be sustained indefinitely, the current trend shows no signs of slowing down. Even if the broader US or global economy entered a major recession, the Boston housing market is likely to remain robust.

Despite potential slowdowns, Boston's demand-driven market will continue to buoy property values. The strong demand in "W" towns like Woburn and Watertown will easily compensate for any dips seen in south shore communities. A perfect example of this is the strong performance of Charlestown, an area just outside Boston where housing prices remain exceptionally high even amid economic fluctuations.

Key Factors Influencing the Boston Housing Market

Several factors contribute to the resilience of the Boston housing market. Firstly, Boston is a small yet highly desirable city with a unique combination of established institutions and industries. The presence of major universities and hospitals, along with tech companies and a robust tourism industry, ensures a constant demand for housing.

For instance, Boston University, Harvard, MIT, and several other well-known institutions, combined with the presence of numerous research hospitals like Brigham and Women's Hospital and Beth Israel Deaconess Medical Center, create a steady influx of students and medical professionals. Similarly, the growth of the biotech and high-tech industries further reinforces the demand for housing in the area. The strong tourism industry also adds to the sustained activity in the housing market.

Fiscal and Political Considerations

A potential catalyst for substantial changes in the market could be the elimination of mortgage interest payments as a tax deduction, a move proposed by certain political figures. However, the likelihood of such a scenario is low given the current political landscape. As long as people continue to be willing and able to pay high prices for housing, there is no reason for property prices to drop.

Historical data from 2017 to 2018 reveals a 42% drop in housing units sold in the Boston area. Despite this significant drop, the market remained very active. Vacancy rates are currently at very low levels, and prices per square foot remain exceptionally high. An example of this current trend can be seen in Charlestown, where a two-bedroom, two-bathroom apartment of approximately 1200 square feet is rented for around 3100 dollars per month, including utilities. Owning a similar property in Boston would cost well over one million dollars.

Conclusion

In conclusion, the Boston housing market does not appear to be on the brink of a crash anytime soon. Its resilience is rooted in a combination of strong demand, stable industries, and a lack of new land for development. While there may be temporary fluctuations, the underlying factors of demand and institutional support will ensure that the market remains robust.