Pricing vs. Activity in Boston's Luxury Condomium Market

Yesterday a Boston Herald headline declared a precipitous drop in Boston's Luxury Condo Prices in the $500K and up range, citing year-over-year statistics compiled by the Warren Group. So there's pricing...and then there's the related (assumed) characterization of inactivity. As article Author Thomas Grillo seems to frame, there is sweeping generalization that little (if anything !) is trading in the luxury condo market. That it's a little quiet. That fewer would-be luxury condominium buyers are considering buying, primarily due to reversals in the stock market earlier this year, and a decline in net worth. That liquidity is now more precious than investing in the right home.

To be sure, this has been a year of adjustment across all industries. However, putting the relevance (or lack thereof) of year over year stats and "trends" aside, as Boston luxury condominiums go, the market has hardly been inactive. It makes sense to consider the many units that have traded....approximately 770 units in inner Boston neighborhoods. In these same neighborhoods, 192 units above $500K have gone under agreement over the past 90 days.

...Is that in decline from previous years? Affirmative. Have there been downward pricing adjustments on a unit-by-unit, development-by-development basis? Absolutely. Have some units remained on the market longer and List to Sale Price percentages increased? Sure. Are some sellers continuing to look backwards, uncomfortable about pricing their units appropriately for the current market? Without a doubt. Pricing may be one thing, but has the bottom dropped out in terms of activity? Categorically not. Are there amazing opportunities to buy a great, high-amenity unit in a first class development at a decent price? Yes.



Sources:

"Fall Floors out for Boston's Luxury Condo Prices" Thomas Grillo, Boston Herald, September 9, 2009

New England Multiple Listing Service


http://www.bostonherald.com/business/real_estate/view.bg?articleid=1196267

Boston Area Beginning to Sizzle After a Slow Year

Following a year of slow sales and seemingly overpriced inventory, there has finally been a turn around in the real estate market. As sellers and real estate agents alike soon came to find, declining prices have suddenly changed the direction of the market. The declining prices of homes and condos have increased not only the buyer pool but brought the declining market back to life as well. Sales are now increasing, and therefore decreasing inventory; making condos of the Greater Boston area (as well as downtown) a hot commodity once again.

After more than a year of a plummeting sales and vacant homes and condominiums, sellers are finally willing to lower their prices. As a result, more buyers are investing into these properties and more homes are selling. While many sellers focus on pricing, they have come to realize that the realty market is unforgiving of overpricing. Buyers will not make a purchase if they do not feel that they are getting their moneys worth. The real estate market is about flexibility and sellers are now learning to become more flexible with the realization that sellers will not stick around. Homes and condos, that were once idle, have experienced a reduction in price, and are now flying off the market (with a handful receiving anywhere from three to five bids a day).

While many thought that the market would continue on a steady decline, analysts soon found that a way to turn around the once booming market would be to lower prices. Lower prices would attract more buyers, offer better investment opportunities and turn the market around, which is exactly what is starting to happen. According to Multiple Listing Service Property Information Network, pending home sales have risen and selling prices are about ten percent lower than they were last year. Some analysts have predicted that as a way of remedying itself, market prices will hit record lows within the next year. This would leave room for more sales and once inventory levels have been minimized, prices will then begin to rise with the economy. While it has been noted that sales outside of Boston are still struggling, Boston’s sales are continuing to heat up. According to MLSPIN, there are twenty one percent fewer condominiums available for sale than a year ago. This is understandable, considering the Boston community is not only one of the most cultural but pleasant cities to live in within the country.

Our recent personal experience has witnessed this first hand. For example, over the past few months, while preparing a list of potential condos (on a Monday or Tuesday) to view over the upcoming weekend, a client may have 6 to 8 top choices. By the weekends conclusion, 4 or 5 of those properties may be under agreement, or have received a considerable amount of offers. The bottom line is… the properties that are priced right, are attracting a lot of consumers, and are the ones that are selling. It is still a buyers market out there. Now go take advantage of it!

Million Dollar Condo Sales Remained High in 2006, Despite Overall Market Slowdown

Economists, real estate brokers, the media, and the overall general public have been talking about the serious real estate bubble "bursting" over the past 12 months or so. Although one of the main indicators of a weakening real estate market, the average number of days on the market, has significantly increased, the number of $1 million plus condo sales during 2006 was near that of 2005 for the downtown Boston market. With the opening of several new luxury condominium developments over the past year, such as 44 Prince (North End), 360 Newbury (Back Bay), and The Residences at the Intercontinental (waterfront), combined with the resale of several units at developments such as The Ritz Carlton Residences (midtown) and One Charles (Back Bay), the number of units sold over $1 million was 373 for 2006. This figure was just below the total of 388 for 2005.

According to figures released by the Massachusetts Association of Realtors, median condo sale prices for 2006 actually increased 2% over the past year to $270,000 statewide ($399,000 in the City of Boston ), whereas the median sales price for single-family residences dropped 4% in 2006 to around $340,000.

As most people are aware, the holidays and start of winter are typically the slowest months of the year for real estate sales activity. Over the past 3 months or so, the market has witnessed a lot of condos being withdrawn from MLS (Multiple Listing Service) or listings which have expired and are currently off of the market. With all the hype of a buyers market still in the air, it will be interesting to see how these units, that were previously on the market, will be priced when they become active listings once again in the upcoming months (let's hope!). Will the sellers who missed the opportunity of high prices 18 months ago try again, but this time to sell their properties at more reasonable prices, or will the trend of high prices and lengthened "days on the market" continue through the upcoming year? Sellers of resale properties are also going to have to think about the steady influx of preconstruction units that are going to be entering the market in the next year. If not priced reasonably, sellers may be in for another tough year.

Sources: "2006 Saw 373 million-dollar sales," Boston Homes, January 6-12, 2006
"Luxe downtown condos skirt housing bust," Kimberly Blanton, The Boston Globe, January 6, 2007