2022 Boston Rental Market Second Half Forecast
Looking ahead to the second half of 2022, there is a lot of uncertainty looming in the Boston housing market. With apartment inventory sitting at historic lows, it would be easy to predict that rent prices will continue to rise throughout the remainder of this year. However, with inflation at a 40-year high and interest rates on the rise, it appears that a market correction may be on the horizon. There are two key trends to watch that could lead to a rental pricing downturn in the Boston apartment market.
1. Will Rising Energy Costs Cripple The Boston Rental Market?
Much like inflation, energy costs have a ripple effect across all industries, including the housing market. Construction and transport costs primarily revolve around the price of diesel fuel. When diesel prices rise, the cost of shipping building materials and working with heavy machinery often increases by the same margin. With the cost of diesel at ridiculously high levels due to bad energy policy; the consumer will most likely have to shoulder the burden of the renovation and construction price increases. The inconvenient truth of construction and renovations is that expensive energy prices increase the cost of maintenance for property managers, which eventually trickles down to the renter in the form of rent hikes. Just in the last two years, we’ve seen a +59.35% increase in the PPI Index for Multi-Family Residential Construction, nearly six times the margin that CPI has risen over the same time span. There is simply no way to hide from high energy prices. Our legislators should consider figuring out some innovative supply side relief on fuels so that construction prices are reduced thereby passing on those savings to homeowners and renters.
While higher energy prices add to the owner’s costs, it adversely impacts the renter’s purchasing power. Not only do they pay for more on gas, home energy, and food but they also see…