Analysts have every reason to expect that the coronavirus will result in a drop in prices for apartment buildings. Out-of-work tenants are less likely to be able to make rent payments. Rent moratoriums prevent landlords from taking action against non-paying tenants. Rent losses increase. Buildings' net incomes decline. Value depends on income, so prices decline.

But the data don't always tell the story we expect. Zaxia, a commercial real estate Web site, publishes a median price trend chart for the most common small apartment type in Greater Boston, the three-family. Zaxia's second quarter data include property transfers that took place in the months of April, May, and June of this year. The second quarter median price shows no decline from the first quarter. It shows a continuation of the steady trend to price increases in the three-family market dating back two years.

Zaxia also publishes a median price trend chart for each of nine of Boston's satellite cities plus Dorchester, quarter by quarter, for the last two years. Zaxia aggregates the data from these ten communities to produce the Greater Boston trend chart. Greater Boston Median Price Chart

Three-families are a good barometer for the larger small apartment market and, to an extent, for larger apartments. Single-family houses are owner-occupant properties, and their price trend says little about investment properties. The same is true of two-families, which in most cases are owner-occupied. Three-families, on the other hand, are largely rental income properties. They are a favorite of small investors. What is true of rents and prices for three-families is generally true for four-families and up. Most three-families date from 1900 to 1920. They include the familiar "three-decker." The volume of sales of three-families, running to 250 in a typical quarter, makes their price trends statistically significant.

Generally, Boston's satellite cities have seen upward price trends in 2018-2020. Brockton showed 20% appreciation in the last year, Lowell 25%, and Fall River 30%. Fitchburg, on the other hand, has shown a 20% decline. Other cities are intermediate and typically show an upward trend. Dorchester, with the highest prices of any of the communities, has seen level prices in recent years.

Prices have risen, but the volume of sales has declined sharply. See Zaxia's chart of quarterly sales volume over the past two years. A decline in volume, if sustained, means that buyers no longer agree with sellers' expectations for price and may foretell a later market decline. Or, it may be that both buyers and sellers have gone to the sidelines, to see where prices shake out.

Overall appreciation for three-families in Greater Boston has been 25% in two years.

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Eric Reenstierna Associates LLC is a real estate appraisal firm taking on valuation and consultation assignments in Greater Boston, Massachusetts and New England. Eric Reenstierna, MAI, is the office's principal and is a commercial real estate appraiser.


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