As one of the oldest cities in the United States, Boston has been totally built-out for decades, which is why all new home construction has to be built up in the form of condominium towers to accommodate its growing population. This is the real story behind Boston’s housing market, which is one of the most expensive in the country. In the five decades between 1950 and 2000, new housing construction was virtually nonexistent because the population was shrinking. Boston’s population peaked in the 1950s at around 800,000 and steadily declined to below 600,000 in the 1980s. Since 2004, the population has been growing, due in large part to an immigrant boom and an influx of young, single professionals. Boston's population reached more than 617,000 in 2010.

With the population outpacing construction growth, the city has committed to adding 30,000 new housing starts by 2020. The problem is that most new construction is for apartments and condos that are too small to accommodate young families or millennials looking to share a living space. With demand for new housing exceeding supply, Boston’s condominium market is on fire, with the median price of condos exceeding homes for the first time in 2015.

Market Insights

As of May 7, 2016, the median home value in Boston was $486,000, which is approximately a 6% increase over the past year, and a 50% increase from the market bottom in 2009. Home values have steadily increased since then, far exceeding the 2007 peak price of $378,000. Condo prices have increased faster and farther, reaching $580,000 in 2015, for a 39% increase over the prior year. Home values in Boston are projected to increase by 29% over the next five years.

After several decades of decline, building permit issuances have increased sharply since 2011. Since 2014, when the city committed to adding 30,000 more housing units by 2020, a total of 17,183 units have been permitted or completed. The city’s plan is to create a total of 53,000 units by 2030.

Property and Transfer Taxes

The property tax rate in Boston has declined since 2014, from a rate of $12.58 per $1,000 of assessed property value to $11.00 in 2016. For a median-priced home of $486,000, the property tax would be $5,346. Upon selling their homes, Massachusetts residents pay a property transfer tax called a stamp tax. In 2015, the stamp tax rate was $4.56 per $1,000 of property value.

Most Expensive Neighborhoods

The Back Bay has always been one of Boston’s most coveted neighborhoods. With classic brownstone townhomes and mansions built on magnificent tree-lined streets, it is quintessential Boston. Many of the townhomes have been converted into several floors of flats that sell for hundreds of thousands of dollars. The median selling price is $840,000; it can buy a one-bedroom, one-bath, 800 square-foot flat on Newbury Street, which has been called the Rodeo Drive of Boston.

Beacon Hill is as picturesque as it is historic, and it has always been home to some of the most affluent residents of Boston. Designated a National Historic Landmark, Beacon Hill is known for its narrow, gas-lit streets, some of which are still paved with bricks. The neighborhood is home to Massachusetts’ State House, and its outer edge lines the famous Boston Commons. The median sales price in Beacon Hill is $703,400, which is up 6.3% over last year.

The South End of Boston was a planned neighborhood of Victorian row houses built on tidal mud flats in the mid-1800s. It has since become one of Boston’s most expensive neighborhoods, known for its arts and crafts scene, restaurants and nightlife. Its median sales price is $745,000, which might buy a 900 square-foot, two-bedroom, two-bath flat.

Top Real Estate Websites

BostonRealEstate.com is a realtor site with everything a buyer or seller needs, including access to multiple listing services (MLS), real-time market data, neighborhood profiles, an informative blog and local real estate news. RealEstate.Boston.com is the real estate section of Boston.com, which is a popular online magazine. In addition to listings and resources, the site publishes informative news features about Boston's real estate market.

New York Real Estate Market

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