Despite the fact that home prices throughout much of Massachusetts have remained below the 2005 peak, a lack of inventory is pushing prices up higher. As a result, many suburban towns are growing closer to the peak prices, which has resulted in high-stake bidding wars, all-cash offers and buyers who are generally more aggressive when purchasing homes in Boston and its surrounding communities.
While many communities in the Boston area experienced significant growth through 2014, Chelsea and Somerville enjoyed the greatest gains. When compared to 2009, these two markets have improved significantly. Between January 1 and November of last year, for example, the sales price for a single-family home in Chelsea increased by 58.2 percent to $260,000 when compared to 2009. In Somerville, median prices increased by 45 percent to $540,000.
Chelsea and Somerville aren’t the only area markets to experience an increase in sales price. In fact, 20 communities north of Boston have grown by at least 20 percent when compared to 2009. The most expensive of these communities, Winchester, experienced a 28 percent increase from $711,000 to $910,000.
The growing prices in these communities has been largely spurred by the increasing real estate prices in Boston. As buyers continually search for more affordable housing, they have expanded their search to areas beyond the city. Furthermore, with available inventory in Boston being so low, many buyer are looking for more options by exploring nearby markets.
In some of these nearby communities, it is becoming increasingly more common to see homes torn down and replaced with an upgraded and updated home. Communities where this has become an increasingly popular choice among buyers include Chelmsford, Tyngsborough and Westford. In many of these popular areas, buyers need to be prepared to act quickly in order to get the home they desire.
According to a study recently published by The Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University, many baby boomers and other empty-nesters are likely to start downsizing in the near future. This will result in a large number of single-family suburban homes becoming available on the market. If this happens, the increase in inventory will help to prevent prices from escalating quickly over the next ten years. When it comes to the Boston area, however, a growing number of people are expected to continue to move into the area as they seek out employment opportunities. This is particularly true in Cambridge and the Innovation District in Boston, both of which many consider to be the areas with the best job opportunities.
While markets in the Boston area have experienced growth in recent years, the same cannot be said of the entire state. In fact, some cities have experienced a slower bounce back, largely due to slower job growth. Following the recession, the median selling price of a single-family home fell by 25 percent in Massachusetts. The state did not start to see improvement until 2012, at which time sales increased by 20 percent and the median price of a home increased by 2 percent. A slow increase in prices is not necessarily a bad thing, however, considering that fast gains in prices is what created the bubble that lead to the recession in the first place.