The Covid-19 pandemic changed a lot of things. It changed the way we work, travel and socialize. And the effects of the pandemic carried over to the Boston area real estate market.
In March of 2020, large parts of the U.S. effectively shut down. How did this affect real estate and mobility? At the onset of the pandemic, most people did not want to move at all. And people who did want to move were challenged because of the difficulties caused by the pandemic, such as closures and decreased interactions.
As the pandemic wore on, many people gained an increased appreciation for the importance of their homes, since they were spending so much time in them. Everyone got a lot of value from their houses, especially those who were able to work from home.
Now as the pandemic becomes better managed and hopefully fades, some lifestyle changes remain. For example, working from home is more common than it used to be, its viability proven during the depths of the pandemic. Significant infrastructure, systems, and norms were established, and they are unlikely to go away any time soon.
Early in the pandemic, urban locations lost some appeal relative to suburban and rural locations. This is because one of the draws of a downtown location is the proximity to restaurants, shops, public transportation, and other people. When establishments shut down, these attractions effectively disappeared. Therefore, in Massachusetts, neighborhoods like the South End, Back Bay, and South Boston lost some of their luster relative to less urban areas such as Acton, Concord, and Lexington. Zillow estimates that real estate in the City of Boston appreciated 15.7% from Jan 2020 through May 2022. This compares to 35.7% in Acton, 37.0% in Concord, and 34.5% in Lexington. Clearly, suburban real estate in the Boston area was characterized by strong price gains.
As the pandemic winds down, dense urban neighborhoods regain their appeal, especially to young professionals who want to meet peers, try new restaurants, and make new connections.
In March of 2020, Boston, like many other cities, shut down.
Working from home
The pandemic led to more people working from home. The frequencies that workers commuted to their places of work changed: Some people reduced the number of days per week that they commuted to an office while some stopped going into an office at all. People who were making fewer trips per week could tolerate living farther away from their offices.
Many people also adjusted their preferences for the interior parts of their homes. Just think: What becomes more valuable when people work from home? A home office, a home gym, and an exercise room or multipurpose room. It made sense for some working families to consider larger houses, since they were spending so much time in them and had new uses for them. A yard is valuable because it provides an outdoor space to play and congregate. This was especially appealing in the early part of the pandemic.
When people spend more time in their homes, they tend to want their homes to look nicer. That means renovations. New cabinets, stainless steel appliances, and granite, quartz, or marble countertops are a few of the features that many homeowners desire. Some homeowners will perform these upgrades themselves or hire a contractor. Others will target renovated condominiums or single-family homes during their home search.
During the Covid-19 pandemic, people learned to appreciate yards and other outdoor spaces. When the pandemic began and information about the new virus’s spread was scarce, a yard was an outdoor sanctuary and a great place to get fresh air and exercise. As the pandemic wore on, yards were also useful for gathering friends and relatives.
Real estate market
At the beginning of the pandemic, there was a major slowdown in real estate activity. People didn’t want to move, or weren’t able to. When activity eventually picked up, prices started rising, especially in suburban areas.
Some changes in the real estate market are not a direct result of the pandemic. For example, very low interest rates made housing more affordable, bolstering prices. Demographic changes are affecting real estate values, too. The baby boomer and millennial generations are abnormally large in population size, so demand from these cohorts can push up property prices.
Which changes are likely to persist after the pandemic ends? Working from home is likely here to stay, at least part of the time, for some people. Home offices will continue to be desirable. A family that set up a climbing structure in their back yard might want their next home to have a yard big enough to bring it with them.
With more people working remotely, commercial office space has decreased in value relative to residential space. Multifunctional spaces, including communal spaces in residential buildings, are more valuable. They can serve as places to work remotely or meet up with friends and colleagues.
The Covid-19 pandemic affected the Boston real estate market on a short-term and long-term basis. Initially, news of a novel coronavirus in the U.S. caused fear and slowed real estate activity. People shifted routines and priorities. Work-from-home got popular and is here to stay. Urban real estate prices rose, and suburban markets appreciated even more. Going forward, the local real estate market will be impacted by the pandemic-induced changes that persist, what happens next with interest rates, and differences among neighborhoods.