A closer look at the downtown Boston condo market slowdown
There has been a lot of positive news out of the real estate market in general lately, especially on a statewide and national level. But things have not been so rosy in downtown Boston....or have they?
Here's a quick visual look at the Boston condo market in downtown neighborhoods over three different time periods.
Back Bay condo market:
Over 10 years in the Back Bay, we see clear trends. 2004 was the busiest year with nearly 700 sales, and even while sales have declined since, prices have fairly steadily increased until this year (although 2009 is still higher than 2007; 2008 was a bit of an anomaly as we'll see below). There is still another month and a half left to the year, but 2009 will have the lowest sales volume in 10 years.
From 2007 to now, Back Bay sales have followed a seasonal, cyclical pattern while declining overall in 2009 (FYI: Q4 2009 is thru Nov 15), while prices have stayed mostly steady other than Q4 2008 when many of the Mandarin Oriental units closed driving the average prices up for that quarter - hence the higher 2008 overall prices in the 1st graph).
Over the past year, Back Bay average prices have bounced around (due mainly just to different types of units selling) so its tough to see any trend over a single year. Sales overall were down substantially compared to previous years.
Beacon Hill Condo market:
Beacon Hill is very similar to the Back Bay. 2004 was the busiest year in 10 years, while 2009 looks to be the slowest. Prices have trended upward with a small pullback since 2007.
Since 2007, Beacon Hill sales volume followed the typical seasonal, cyclical pattern and, through the fluctuations, prices have trended downward over that period.
Over the past year, Beacon Hill real estate prices have been quite volatile (mostly because there just aren't enough condo sales each month so what particular units sell drive the stats), though prices seem to sit right around the $700 per square foot price level towards the 2nd half of 2009.
South End Condo Market:
The South End is the largest and most varied of these three neighborhoods, but we get more of the same over 10 years. Sales were at their highest in 2003 and lowest in 2009 while prices have steadily increased.
Since 2007, South End sales have been seasonal but absolute prices have been volatile with the low point coming in the Winter of 2008 into 2009. Though that clearly has more to do with the types of units selling at that time as price per square foot has remained pretty steady just under $600 per square foot.
Over the past year, we saw an uptick in South End sales this summer (though still slower than 2008), while prices have been fairly steady, maybe a little higher over the busier summer.
Combined Downtown Boston Condo Market:
Combining all three neighborhoods, the same trends emerge over 10 years. Sales peaked in 2004 while prices have trended upward.
Since 2007, seasonal sales and fairly steady prices are again what we see.
Over the past year, seasonal activity and prices have varied, although price per square foot has remained steady.
What's this all mean?
What is means is the following - the downtown Boston condo market has clearly performed a lot differently than the overall Boston area real estate market.
If you have owned in one of these neighborhoods over any decent length of time, your condo has probably risen in value (over 10 years, somewhere in the range of 65%). Even, if you purchased in the last couple of years, you're most likely breaking even - as opposed to about 20% decline in the general Boston area real estate market since 2005.
Boston condo sales activity is way down in 2009 and we haven't seen the same recent uptick that there's been in the general Boston real estate market. Lots of Boston buyers and sellers (and developers) are still sitting on the sidelines "waiting this one out". As the economy improves into 2010, I expect to see more people who have a natural need to buy and sell come back into the market. Plus with mortgage rates at such low levels (even for some jumbo loan products) and looking to remain that way into early 2010, and the expanded income limits for the homebuyer tax credit allowing more Boston buyers (and some sellers) to take advantage, I think we'll see a nice increase in the level of activity come late winter/early spring.
That said, there is clearly a lot of "luxury" ($1M+) inventory out there on the market - most of it in the new development buildings like 45 Province, or The W, etc. This is going to take a while to sell, though developers have been mostly averse to dropping prices so declines have not been seen. The strategy so far has been to wait it out. I don't see any reason that won't continue to be their strategy - for the most part.
In the non-new development market, we're still seeing fairly average activity and steady sales prices which I don't suspect will change much. There may have to be some price reductions to spur more sales in 2010, but not by much.
It is remarkable how much the market can vary from region to region, town to town, and neighborhood to neighborhood. Hopefully this quick graphical summary shows how different the Boston condo market is from the overall Boston area real estate market.
The market data even varies substantially from neighborhood to neighborhood. I'll have a complete year end market wrap-up written in early January with each Boston neighborhood (as well as different break-out price segments and new developments) shown separately for analysis. Great stuff, not to be missed.
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