Straight Outta Boston…Skyrocketing rents are forcing people to move

    Vuong Report

    August 22, 2015

    With the tremendous amount of development that is happening in the city of Boston, property value have risen significantly and so have rents. In a recent article from WBUR,”...stories of exodus are increasingly common in East Boston, but it’s happening across the city. A recent study from Northeastern University suggests Boston’s housing market is in crisis: Young millennials and aging baby boomers are relocating from the suburbs, occupying housing that traditionally went to blue-collar Bostonians.”

    According to The Greater Boston Housing Report Card, “...at rental vacancy rates of 5.5% rents will stabilize. At vacancy rates below this level, rents rise as renters compete for a smaller pool of existing units.” The vacancy rate hasn’t been at 5.5% since 2010, which is why we have seen the rents continue to rise in and around the Boston area.

    Boston Metro Area Vacancy Rates
    Boston Metro Area Vacancy Rates
    Average_Annual Asking Rent and Effective Rent in Greater Boston
    Average_Annual Asking Rent and Effective Rent in Greater Boston

    In the report, it was also noted that “The continued upward trend in rents is due not merely to flagging supply but also to changes in the type of housing residents are seeking. Young households that might have been ready to make the transition from renting to homeownership have found it difficult to afford homeownership or have opted to remain in the rental market for other reasons. This has contributed to low vacancy rates and higher rents. Equally important, the number of undergraduate and graduate students, as well as medical interns and residents, continues to multiply in the region, putting additional pressure on the rental housing stock.” Boston had the nation’s third-highest median rent in 2013, behind only D.C. and San Francisco according to a NYU study.

    I believe these factors should really make one consider home ownership. Home values are up however at least you know your mortgage won’t change like rents will. Obviously the first thing you will need to do is make sure your finances are in order. If you want to cut down a mortgage or diversify your investment portfolio, why not consider a multi family? With Unemployment at record lows in the past 5 years as well as record low interest rates, and household income increasing 15% between 2006 and 2013 perhaps its time to consider building home equity.

    Boston median gross income vs Boston median gross rent
    Boston’s 15 percent increase over seven years translates to an average annual raise of over $700 (in constant 2013 dollars) for the median renter household.

    30 Year Mortgage Rate Trend over 5 years
    30 Year Mortgage Rate Trend over 5 years

    source: tradingeconomics.com

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