Massachusetts’ South Coast will not see MBTA commuter rail service until the end of next year, but the train is already making waves in the region’s housing market.
Along with homebuyers looking for more affordable single-family homes compared to other parts of Massachusetts, lenders say investors – many from the Greater Boston area – have flocked to Bristol County’s small multifamily properties, anticipating that their investment will appreciate as train travel transforms the region.
“Southeastern Mass., the South Coast have been a long-kept secret for a long time,” said Nicholas L. Christ, senior vice president of sales and marketing at Swansea-based BayCoast Mortgage. “Combine [the rail project] with a perfect market for the mortgage industry – extremely high demand and then you bring in the investors – for Bristol County it was kind of a double whammy.”
While lenders have seen some slowing down in Bristol County’s multifamily purchase market in recent weeks, demand among single-family homebuyers remains strong, even as interest rates rise.
Small Multifamilies Draw Investors
Bristol County saw 7,230 purchase mortgages issued for single-family, condominium, two- and three-unit homes in 2021, an increase of 9.5 percent over 2020 and 10.2 percent compared to 2019, according to The Warren Group, publisher of Banker & Tradesman.
About 91,800 of these residential purchase mortgages were issued in Massachusetts last year, with growth rates of 10 percent over 2020 and 10.7 percent over 2019, similar to what Bristol County saw.
During the first five months of 2022, 2,576 purchase loans were made in Bristol County and 29,950 were made statewide.
“Real estate, investors feel, is still the place to be long-term, and I don’t disagree.”
— Paul Matos, branch manager, Guild Mortgage
Purchase mortgages for two- and three-family homes saw the most growth in Bristol County over the course of 2021, with numbers of loans issued increasing by 37.8 percent compared to 2020 and 33.7 percent over 2019. Throughout Massachusetts, purchase mortgages for two- and three-family homes increased by 36 percent over 2020 and 25.6 percent over 2019.
The prospect of commuter rail service to and from Boston and within Bristol County has partly driven demand for small rental properties, Christ said, noting that the market for these homes has approached record levels of activity. Small multifamily properties continue to sell, he added, though bidding wars have started to taper off in recent weeks compared to the previous two years.
The South Coast Rail project will connect the coastal cities of Fall River and New Bedford, as well as the city of Taunton, to the MBTA’s existing Middleborough line. The MBTA expects service to begin at the end of 2023.
Paul Matos, a branch manager with Guild Mortgage in Dartmouth, said Fall River and New Bedford have made other investments in their communities, including waterfront development and adding amenities, to help attract and keep residents.
Many of the multifamily investors buying locally have come from outside the region, Matos said, including Boston. Despite rising interest rates making refinance loans – often a source of funding for property purchases – more expensive, investors have continued to seek opportunities to buy small multifamily properties, Matos said, adding that demand has recently started to slow down.
“We’re seeing appreciation, probably not as robust as it has been, more of a normal market with all these interest rate increases,” Matos said. “Real estate, they feel, is still the place to be long-term, and I don’t disagree.”
Rental listings portal site Apartment List estimates the monthly median rent for a two-bedroom unit in Bristol County has consistently been up 14 percent year-over-year since March, and now sits at $1,360.
While rents had increased at small multifamily properties during the pandemic, Matos said, they have recently remained stable.
Condos Offer Affordable Options
The year-to-date median sale price for a single-family home in Bristol County through May was $425,000, according to The Warren Group.
Demand has remained strong for single-family mortgages and first-time homebuyers, with some buyers coming from the Greater Boston area in search of more affordable options, Matos said.
Lenders issued 1,456 single-family and 333 condominium purchase mortgages in Bristol County in the first five months of 2022. The region saw 4,685 single-family and 858 condo purchase mortgages over all of 2021.
While Bristol County remains a seller’s market, Matos has heard of instances where borrowers had offers accepted below the asking price. Realtors have started seeing fewer homebuyers at open houses, Matos said, and sellers have started accepting contingencies again as part of the transaction.
Christ, with BayCoast Mortgage, said the limited inventory of single-family homes has given the condo market a boost.
“Condos have kind of stood out because the availability of single-family homes was not there,” Christ said. “Condos, from an affordability standpoint and from an availability standpoint, made a more attractive buy than maybe in years past.”
Black Buyers Look South of Boston
As interest rates rise, preapprovals need to be reevaluated as borrowers search for homes, Matos said. While the current rate environment might make monthly payments unaffordable for some, Matos sees signs that the market could start benefiting buyers as prices stabilize, competition declines and properties stay on the market longer.
Matos said he often works with Bristol County’s low- and moderate-income buyers, many of whom are immigrants.
Guild Mortgage entered the Massachusetts market last year by acquiring Residential Mortgage Services, the top lender across the state in 2021 for MassHousing loans, mortgage products for first-time homebuyers. Residential Mortgage Services made 40 percent of its loans to low- and moderate-income homebuyers two years ago, according to the Massachusetts Community & Banking Council, which recently released a report evaluating 2020 Home Mortgage Disclosure Act data.
Some Bristol County communities have seen racial diversity increase as Black borrowers find success buying homes there. The Massachusetts Community & Banking Council’s report, which was prepared by the University of Massachusetts Donahue Institute, found that Taunton, where Black residents make up 7 percent of the population, accounted for 23 percent of all owner-occupied home purchase loans. In Fall River, with a population that was 6 percent Black in 2020, 17 percent of these types of loans went to Black borrowers.
Low- and moderate-income buyers still face challenges in Bristol County, Christ said. BayCoast Mortgage, the mortgage lending division of BayCoast Bank, has prioritized working with these homebuyers but has seen them face challenges amid the lack of inventory, he said. As part of an initiative to help first-time homebuyers, BayCoast plans to launch a $500,000 program that will provide matching grants for down payment assistance.
“You still have prices at an all-time high; you have rates that have gone up faster than anybody anticipated, so that market has made it even harder than it was before, which was basically impossible, to harder than impossible,” Christ said. “We’ve made really every effort to give that extra attention, and we will continue to, and as the market changes, hopefully there’s more opportunity there.”