Who Wants to Be a Millionaire? The Boston Edition
With a stable economy and expanding population, Boston is experiencing an increase in the number of individuals looking for a place to live. Housing scarcity and economic affluence are quickly raising rental and home sale costs across the city. With their general financial success, the city's residents are willing to pay top dollar for homes. From Back Bay's historic district to a convenient spot in downtown Boston, residents are forking over high five-figure, and even six-figure, checks to live in the area. Therefore, it is probably not surprising that as of 2017, Boston has the third-largest rate of millionaire households in the country. Approximately 7.5 percent of the city's residents, and 139,000 households, are considered millionaires. That translates to just over 15,400 full-time Massachusetts residents paying taxes on an adjusted annual income of one million or more, and 17,000 counting out-of-state taxpayers with properties in Massachusetts. Collectively, according to the state's Department of Revenue, the $1 million crowd has collective earnings of about $62 billion.
Things are looking promising for Boston on the economic and real estate fronts. The number of job opportunities is growing as new industries and businesses are choosing to call the city home. Several high profile firms have moved into the region in the past several years, which significantly contributed to rising levels of employment. Between 2014 and 2015, Boston's economy grew by about four percent. Simultaneously, unemployment levels dropped from about 4.4 percent in 2015 to 3.5 percent in 2016. The state's job growth has exceeded state and national predictions set by the Massachusetts Executive Office of Labor and Workforce Development. That trend is expected to increase through 2017.
In Boston, the three leading job sectors are: health care and social assistance; professional, technical, and scientific services; and finance and insurance. Most people were employed in the health care sector, which accounts for roughly 20 percent of the employment market. The science market employs about 12 percent of the city's population, and the financial and insurance sector employs around 11.5 percent of the population. Of all sectors, finance and industry produces the highest average annual income. Company management is the second highest-earning profession, followed by scientific, technical, and professional services. With the increase in job growth and salary, residents can afford to pay top dollar for their living places. As housing becomes scarcer across Boston, competition for housing is increasing. That competitive spirit, combined with dwindling housing opportunities, means homeowners and landlords can continue raising the prices on their homes and apartments.
As a byproduct of the local job growth rates, prices are up in the residential and commercial real estate markets. Vacancy rates are low in the commercial sector; they dropped from about nine percent in the last quarter of 2015 to around 7.5 percent in the last quarter of 2016. As with individuals, corporations are earning money, and in turn demanding higher-level spaces to set up business (mostly Class A properties and fewer Class B properties).
Prices for single-family residences rose eight percent between 2015 and 2016. Statewide, the median sale price for a single-family home is $410,000. That is about $30,000 more than the average sale price last year. In Back Bay, one of the city's trendiest neighborhoods, a one-bedroom home currently sells for an average price of $627,000. The average price of a two-bedroom home is $1,350,000, and the average price for a two-bedroom home exceeds $2,500,000. Across all properties, the average listing price for a single-family home is $747,000. In Beacon Hill, another one of Boston's wealthiest neighborhoods, the average home price for a single-family home is about $420,000. The average listing price for a two-bedroom or a three-bedroom house exceeds $1 million, and the average for a four-bedroom house exceeds $5,500,000. In the Seaport District, which is catching up to Back Bay and Beacon Hill, people are spending an average of $2,546 per SF on housing. Pricing varies throughout the neighborhood, with the lowest rates around $660 per SF.
Boston is surpassed in the number of millionaires only by Washington, D.C., New York City, Los Angeles, California, and Houston, Texas.