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Massachusetts Top Tips
1. Never buy without a thorough home inspection. The housing stock is old.
Here in Massachusetts, the wildcard is condition. Knowing how to evaluate the condition of a property is key to getting a place that will hold value.
The housing stock in Massachusetts, by and large, is old: not Colonial-era old, rather, Industrial Revolution-era old. Large tracts of housing sprang up in cities and towns throughout Massachusetts between 1880 and 1930 or so. Much of this housing stock is still here. Much of it is sturdy, wonderful construction. Some of it was built poorly. Some is not aging gracefully. Some has been well looked-after. Knowing the difference can save you tens of thousands of dollars.
What can go wrong? I have seen more than one house with a new electric service box, with modern wiring leading out of it, and three-pronged outlets. To an untrained eye, that seems like a rewired house. But, an inspector may find that the outlets are ungrounded because the new lines go into junction boxes that connect to old knob and tube wiring in the walls. No outlets are grounded and the wiring is outdated. A full re-wiring job runs $15,000-$30,000, depending on the size of the house.
Because condition plays such a strong role in valuation here, mechanized on-line valuation tools cannot adjust for variations in condition — which can easily be $50,000 in immediate repair costs. Some of the big-ticket items that a buyer of this housing stock needs to look out for are knob and tube wiring, brass piping, and cast iron sewer lines. By 2010, these materials are near the end of their lifespan. Rewiring a house or re-plumbing goes far beyond the typical rehab cost.
2. Because of the colleges and hospitals around Boston, public schools get more scrutiny that typical. School reputation drives property values here.
It’s all about the schools here in the greater Boston area. Even if you don’t intend to raise children here, you should pay attention to the schools. Towns like Arlington enjoyed strong appreciation during the Bubble on the heels of improvement in their schools. In contrast, nearby Waltham, it had less of a rise during the same time period.
3. Be aware of commuter routes. Bad weather and congested roadways cause this to matter more than elsewhere.
For example, prices around Davis Square, Somerville appreciated more than 300 percent in the Bubble. The biggest factor was the opening of the Red Line MBTA station in 1986 and the business development that it brought with it. Housing prices around MBTA stops along the Red line are very sensitive to distance because there are large numbers of people who live car-free around these stations. A two-bedroom condo within a 5 minute walk of Davis Square could command a price $100,000 higher than a similar condo that was beyond a mile of the MBTA.
Beyond the ring cities of Cambridge, Somerville, and Brookline, the presence of a commuter rail stop affects property prices, but less than the school system’s reputation.
4. Parts of Boston and its suburbs are more stable than most other real estate markets.
Three factors have slowed supply: fewer sub-prime foreclosures and court actions regarding US Bank v. Ibanez. The third is geography.
Massachusetts had a lower-than-typical rate of subprime loans, and subsequently less foreclosure early in the recession. Foreclosures since then have been slowed by legal action, which has kept the flood of distressed properties from driving prices down sharply and suddenly. In places where the supply has built up, prices are declining. In places where housing scarcity remains, a seller’s market persists and demand has not slackened significantly.
Boston has the Atlantic Ocean on one side, limiting the range of its suburbs. The suburban ring around Boston is more like a suburban crescent. In town and in the suburbs, buildable lots are hard to come by. This has kept land prices high within a good commute to Boston. Many undeveloped lots have ledge or some other feature that makes them practically unbuildable. Frequently, houses are torn down for new construction. Many of the tear-downs have been post-War houses in neighborhood suburban lots.
Demand remains high, especially near Boston where there are few building lots. The Boston area has a concentration of wealth and good employment opportunities due to the large numbers of internationally-recognized hospitals and universities and the businesses they support. Prices have held most stable near mass-transit lines and in the towns with well-reputed public schools.
5. Beyond Boston and its suburbs, Massachusetts real estate moves in a pattern similar to the rest of the country.
Prices have receded, and there are good deals to be had. Massachusetts has two resort areas: Cape Cod and the Berkshires. Both have international appeal and are good places for vacation homes or long-term investment.
Many of the former manufacturing cities were enjoying a renaissance before the recession. But currently, Massachusetts, away from Boston, is experiencing a buyer’s market similar to the rest of the country. There are opportunities for buyers where prices are deflated in cities like Waltham, Worcester, Lowell, Holyoke, and Springfield. There are development opportunities in conversion of manufacturing buildings into lofts and residential property , once the economy gets moving again.
6. Small condo associations: a housing trend in Massachusetts
Choices about size are the same in Massachusetts as they are elsewhere in the county, with one exception. Two-family and three-family housing is not an uncommon feature in small cities throughout the United States. But, in Massachusetts, there is a unique way of buying and selling them. Two-family and three-family properties can be converted from rental units to separately owned condominium units. Therefore, a rental building with two units, which sells for $500,000 may be converted to two condos, which sell for $300,000 each. This situation where the sum-of-the-parts is higher than the value-of-the-whole has contributed to price inflation during the Bubble. It has also reduced the available small rental property stock.
Rona Fischman is the principal broker of 4 Buyers Real Estate. She is a founding member of the National Association of Buyer’s Agents. Since 2008, Rona has been a primary author at Boston.com Real Estate Now; join her there for an ongoing discussion about issues in Massachusetts real estate.