Boston Apartment Rental Market Trends
At first glance, it would appear that it’s back to business as usual for one of the nation’s strongest housing markets. With inventory levels closely mirroring pre-pandemic trend lines and rent prices stabilizing, it would be easy to assume that we’re getting back to normal. The general rule of thumb for decades was that a significant portion of rental housing stock in Boston would raise their rents proportionally to how much universities increased tuition. Therefore if Harvard increased tuition and dorm housing by 3% most landlords would follow that pattern. However, there are still some recent interesting socio-economic trends that are worthy of attention.
Unemployment Uptick in Boston, MA
Boston’s unemployment rate rose sharply in May to 3.7%, up from 2.9% in April of 2024. Boston’s labor market has remained one of the strongest in the country over the past two years. As long as the local labor market remains strong and innovation keeps occurring, the unemployment number should trend back downwards over the next few months. Should we start to breach the 4.5% unemployment barrier we would certainly begin witness greater rental turnover, more leasing choices and faster price improvements or concessions. However, if unemployment reaches 6% you can rest assured rental pricing will come down in a meaningful manner. The silver lining of a poorly run city or bad economy with fewer jobs means rental prices drop.
Interest Rates and Inflation
The Fed has hinted that it may cut interest rates during the final quarter of 2024 following a 40 year high in CPI over the past few years. Interest rates going down would be warmly welcomed by landlords and developers alike. New construction slowed to a crawl over the past two years because rising interest rates have made profitability all but impossible for new developments. Banks are very tight right now and do not want to lend money in…