South Boston has been one of the hottest housing markets in Metro Boston over the past decade. Southie consistently maintains some of the highest average rent prices and lowest apartment availability in the city, and it’s also one of the most active real estate markets in terms of total residential real estate transactions.
So if you’re one of the many people who aspire to call South Boston home, you may be wondering which will cost you more, purchasing a home or renting an apartment. In this article, we will break down the monthly difference in the cost of owning a home vs renting an apartment in South Boston based on the most up-to-date average rent prices and median sales prices.
In order to calculate the monthly cost of home ownership, we’re taking the expected monthly mortgage payment of the median sales price on a standard 30 year loan, with 30% down and 3% APR. We’re also factoring in the average monthly property taxes of that median sales price, and adding in the average homeowner’s insurance for a Boston resident. We’ve also added $300 in monthly costs for condo rent vs. buy calculations that would cover an average HOA a townhome owner would typically pay.
Average rent for South Boston apartments currently sits at $2,873. That is over $300 more than Boston’s average rent price of $2,545, and it ranks Southie as the 8th most expensive neighborhood to rent an apartment in Boston. South Boston’s average rent price can be further broken down by bedroom:
|Neighborhood||Studio Apartment Avg. Rent||1BR Apartment Avg. Rent||2BR Apartment Avg. Rent||3BR Apartment Avg. Rent||4BR Apartment Avg. Rent|
The median sales price of a single family home in South Boston is $984,922. Compared to the city of Boston where the median sales price is $772,925, homes for sale in South Boston cost $200,000 more on average. South Boston condos have sold at a median price of $792,852 over the past 12 months, just shy of $100K over Boston’s median condo sale price of $698,546.
Based on these median sale prices, we can take what a monthly mortgage payment would cost and add the estimated property taxes, insurance and maintenance to get an idea of what the cost of ownership would be monthly. For a single family home, the average mortgage, taxes and insurance in South Boston would calculate to $3,903 per month. Based on the condo median price, a townhome owner in Southie would pay $3,467 on average per month, which includes a $300 monthly HOA fee.
If we take these estimates and compare them to the average rent price, we can see that owning a home is more expensive monthly in the short-term compared to renting an apartment. The average condo owner would be paying $594 more than the average renter in South Boston, while a homeowner would be paying $1,030 more per month. Bear in mind that these figures are broad and based on median sales prices and averages. They do not take into account other important considerations such as utility expenses, commute, size of unit, or long-term appreciation.
If we take this equation and break it down by property size, we can see some areas of opportunity for buyers in South Boston. By comparing the median sales prices with the average rent prices of different size units, we can see that owners of 1 bedroom and larger 4 & 5 bedroom properties do much better in the South Boston rent vs. buy analysis compared to studio, 2 and 3 bedroom property owners.
So based on these averages, if you are looking to purchase a home in South Boston but are unsure of the costs, focusing your search on 1 bedroom, 4 bedroom and 5 bedroom properties would yield you a similar monthly budget compared to renting.
This same formula can be useful to evaluate any two properties you are comparing if you are in a rent vs buy dilemma yourself. If you know the location of the properties, you can get even more in depth in your analysis by factoring in things like commuting, parking, utilities and other expenses. You can also be more exact in your homeowner’s insurance and maintenance estimations.