How to decide if you should rent or buy in the Boston area

It’s not an easy decision in the best of times given the costs and the competition. But the novel coronavirus pandemic has made it that much tougher: Should you buy or rent in the Boston area?

Answering the question requires digesting a ream of stats now that can seem both contradictory and crystal clear. What’s more, everyone’s got an opinion (particularly those friends, of course, who just took the plunge into the sales market).

To help you, here’s what to consider when considering whether to buy or to rent in Greater Boston.

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First, the stats. No one report or source is 100 percent accurate in showing the state of either the Boston region’s rental or its sales market. Some are more accurate than others, particularly analyses of the sales market.

Those that rely on closed deals for the sales market are probably better than the bird’s-eye ones that factor in proprietary in-house estimates. We would suggest the monthly reports that the Warren Group, a Boston research firm, and the Greater Boston Association of Realtors release together; and the quarterly ones that Miller Samuel, a New York appraiser, and brokerage Douglas Elliman put out. (Curbed Boston has regular write-ups on both.)

As for rental reports, those can be hit or miss. Most from sites such as Zillow and Trulia only track in-house listings. Others do that, plus estimates based on those listings. And still others, including RENTCafe, specialize in bigger apartment buildings such as those with at least 50 units. Many Boston-area landlords own far fewer units.

Still, these rental reports—again, many of which you can find written up on Curbed Boston—provide at least a snapshot or a filter for understanding what prospective tenants are up against. You will not peruse them and go away thinking Greater Boston is a cheap place to rent an apartment.

What they all agree on. And that’s kind of the point. If you’re mulling whether to rent or to buy, all available data will show you that either is expensive compared with much of the rest of the United States.

For instance, speaking of those reports, a Warren Group-Greater Boston Association of Realtors report pegged the median sales price for a detached single-family in December 2019 at $605,000 based on closed deals, and the median condo price at $542,250.

And a January 2020 report from listings and research site Apartment List showed median one- and two-bedroom rents generally the same as the year before—that is, high. The median one-bedroom rent in Boston proper was $1,710 a month, for instance, off only 0.4 percent from January 2019. And the median two-bedroom rent was $2,120, up 1.5 percent.

So just knowing up front the costs of renting and buying can help you decide whether you should do either. You can pretty much extrapolate from the available data what your budget will cover.

Downpayments. If you need further budgeting help, consider what downpayments cost in the Boston-area sales market given the aforementioned prices. The median downpayment for a Boston-area home was $76,500 as of the tail end of 2019, according to a report from real estate listings and research site Realtor.com.

The finding highlights one of the biggest hurdles for many in buying a condo or a house in the region. The price tags are one thing, but the initial downpayment is something else entirely.

To underscore that, the Realtor.com report showed how much a prospective buyer would need to save per month to afford the median downpayment in one, three, and five years. In five years, it would be $1,219 a month; in three, $2,070; and, in one, $6,323. (These could be seen as essentially second rent checks every month.)

The savings sums—and the downpayment median itself—are high compared with many other U.S. metros too. To afford the median downpayment in New York of $71,600, a buyer would need to save $1,141 a month over five years, $1,937 over three years, and $5,918 over one year. In D.C., a buyer would need to save $516 a month over five years, $877 over three years, and $2,678 over one year to afford the median downpayment of $32,400.

If you can’t swing such monthly savings sums or the lump-sum downpayment, then the Boston region’s housing market probably isn’t even worth considering. Remember, the downpayment is before any closing and financing costs such as interest on a mortgage.

What if, though? A word on home values. The axioms about stock market returns being generally the same or better over time than returns on residential real estate and that people should buy to have a place to live rather than as an investment hold true in the Boston area. Buy if you can afford it and/or if it’s a long hold.

Otherwise, don’t expect a relentless march upward in appreciation on your house or condo. An example: Previous to the late 2010s, Boston-area home values last peaked in 2005, about two years before the Great Recession; and then took a decade to return to that peak. In some areas, home values have yet to recover what they lost in the late ‘00s.

Along the way, foreclosures rippled through the region, and some of the very owners who had climbed on to the property ladder pre-crash found themselves struggling to compete in the rental market.

Yes, yes, but what about the fallout from the pandemic? As of early April, the smart money re: Boston-area real estate has housing prices maybe moderating a bit due to the economic effects of the novel coronavirus. That is, prices might come down or not go up as much as nor as consistently as before, much as they did during the 2008-2009 recession.

As for the competition, though, that is thinning out a bit due to the pandemic. The number of new listings has plummeted in the area and there are simply fewer people actively looking. Part of that is the pause that sellers and brokers hit on conventional open houses. Another part is a simple and understandable wait-and-see attitude among would-be buyers.

Who knows how this will all play out, especially after the last recession didn’t cause prices to crater? It might be best to continue renting based on this uncertainty alone (though renting amid coronavirus presents its own challenges).

The bottom line. The Boston region’s housing costs preclude most people from buying, even amid the pandemic. Renting has its advantages regardless, including more flexibility and less responsibility for things such as maintenance or snow removal. But it does leave tenants at the whim of an increasingly expensive marketplace as well as now what could be the worst economy since the 1930s.

As for buying, there is the potential—the potential, not the certainty—of a return over longer periods of time. Plus, after 15 or 30 years, you might own your house or condo outright. After 15 or 30 years of renting, on the other hand, you owe the next rent check.

Next steps. There are a few online calculators—including from Zillow and the New York Times—for deciphering what you might or might not be able to afford in the Boston region and whether it’s better financially to rent.

You will also want to parse where in the region you want to live and can afford. Greater Boston is unique among major U.S. metros for being a collection of dozens and dozens of towns and cities. Housing costs can shift dramatically from ZIP code to ZIP code, even mile to mile (for often frustratingly myriad reasons). Start here for finding the right fit.