B
oston's real estate market in 2025 is expected to be marked by measured optimism, despite ongoing challenges in both residential and commercial sectors. Massachusetts faces two major hurdles: high housing prices and underutilized commercial office space. The cost of living and a struggling commercial sector are critical factors for the region's economic health.

    In 2024, Boston-area affordability took a hit, with typical home prices surging past $900,000 (nearly 6% growth year-over-year) and mortgage rates increasing to 7.1%. Nearly a quarter of office space remained vacant throughout the year. However, there are promising signs in the residential market, as experts predict housing inventory will continue to rise.

    Winter home buyers may find less competition and potentially softer prices than those looking to move in the spring or summer. Policymakers, developers, and commercial building owners are holding their breath for signs that the office market will stabilize in 2025. Major employers like Amazon and Salesforce are revamping office policies, which could lead a trend of getting commuters back downtown.

    The city's program to convert empty commercial buildings into housing has taken root, potentially increasing residential inventory and reducing open office space. The Federal Reserve's handling of interest rates in 2025 will play a significant role in how Boston adapts to new real estate realities. If the Fed only makes modest rate cuts, homeowners may be reluctant to sell due to locked-in low mortgage rates.

    Several construction projects could serve as barometers for Boston's residential and commercial health in 2025. The South Station tower's luxury condos will test buyers' willingness to spend big on housing while rates are high. The Harvard Enterprise Research Campus in Allston, which includes a hotel, residences, and lab-and-office complex, may compete with other new science facilities due to its university affiliation.