In a recent study conducted by Forbes Magazine, Boston was named the number one city to go from renting to buying.  The study looked at how the premium to buy (the spread between what you’d spend on renting and what you’d pay each month for a mortgage) has decreased across a number of cities, as well as economists prediction of significant home price increases over the next five years.

At the top of the list of cities where buyers should begin to buy is Boston, where economist predict that the home price index will increase by approximately 19% over the next 5 years.

1. Boston
2. Charlotte
3. Chicago

The premium to buy figures are relatively straightforward, however, the home price index increase predictions are a function of the S&P/Case-Shiller Home Price Index, which does carry with it intricacies that are not entirely representative of the downtown Boston condo market (see
Debate Ensues over Case-Shiller Index).

That the real estate market conditions in Boston continue to ebb and flow is an understatement. You’ve heard time and again that “all real estate is local”, and the current statistics contained herein demonstrate why this is indeed a truism. Any sweeping statement of market conditions in the vast “Boston Real Estate Market” is virtually meaningless. To get a true picture, one has to drill down to look at current neighborhood-specific information. This article looks at current market trends for six (6) Boston neighborhoods: Back Bay, Beacon Hill, Charlestown, Jamaica Plain, South Boston and the South End.

The data referenced herein is based on a 12-month rolling calendar from December 2008 to December 2009 for condos, multi-family homes and single-family homes. Definitions:

• Seller Advantage Market - there is currently less than a six (6) month supply of homes for sale.
• Buyer Advantage Market – there is currently more than a six (6) month supply of homes for sale.
• Balanced Market – there is exactly a six (6) month supply of inventory.

If there is no mention made of a property type within a particular price range, it is because there are no listings within this category. All data was analyzed and compiled by Keller Williams Realty, Boston-Metro from data supplied by LINK (one of two Boston MLS systems).

Back Bay: There is a Seller Advantage Market for condos priced at or below $699K, and a Buyer Advantage Market for condos priced at $700K and higher. A Seller Advantage Market for multi-family homes priced up to $999K converts to a Buyer Advantage Market for those priced at or above $1M. With respect to single-family homes priced between $750K and $999K, this is a Seller Advantage Market. while those priced above $4M fall under the Buyer Advantage Market category.

Beacon Hill: All condos priced at or under $999K are in a Seller Advantage Market. Condos priced at or above $1M are in a Buyer Advantage Market. Multi-family homes priced at or above $1M are in a Buyer Advantage Market. With respect to single-family homes, those priced above $1M are in a Buyer Advantage Market, the exception being single-family homes priced between $1.5M and $1.749M for which there is a Seller Advantage Market.

Charlestown: Condos priced between $250K and $499K, and between $600K and $699K find themselves in a Seller Advantage Market; all other price ranges are in a Buyer Advantage Market. Multifamily homes are in a Seller Advantage Market. Single-family homes under $749K are in a Seller Advantage Market, while those priced between $750K and $999K and between $1.25M and $1.499M are in a Buyer Advantage Market.

Jamaica Plain: All condos, except those priced between $700K and $999K are in a Buyer Advantage Market. Multi-family homes are in a Seller Advantage Market, with the exception of those priced between $500K and $999K, which are in a Balanced Market with exactly a 6-month supply. Single-family homes are layered a bit more multifariously: those priced at or under $499K and between $1.5M and $1.749M are in a Buyer Advantage Market, those priced between $750K and $999K are in a Balanced Market, and those priced at or above $1.75M are in a Seller Advantage Market.

South Boston: All condos priced at or under $499K, are in a Seller Advantage Market, whereas all other condos are in a Buyer Advantage Market. All multi-families are in a Seller Advantage Market, as are single-family homes priced under $499K. Single-family homes priced between $500K and $749K are in a Buyer Advantage Market

South End: Overall, there is a Seller Advantage Market for condos, multi-family homes and single-family homes. The exception is single-family homes priced between $1.75M and $3M, which remains a Buyer Advantage Market.

So what does all of this mean? Statistics represent aggregated data, and should not be narrowly interpreted to mean that there are no exceptions for specific properties on the market. For example, in a Seller Advantage Market, a particular owner may be flexible on price if there are mitigating circumstances such as a pending relocation, or the pre-purchase of another home. Similarly, in a Buyer Advantage Market there are always going to be sellers who are unrealistically inflexible on their price because they are in no hurry to sell, or still unrealistically believe that their home is worth far more than it actually is. Hiring a good Marketing Agent (see Hiring a Marketing Agent to Sell Your Home) or Buyer’s Agent (see Accredited Buyer Representative (ABR) Basics) is the best way to understand these individual circumstances within the larger context of any neighborhood’s market conditions.

LINK, one of the two MLS systems that serve the Boston market, routinely holds a lecture series for its members and guests that cover a wide range of real estate related topics.  The most recent lecture took place at the ultra-luxury Mandarin Oriental in Boston’s Back Bay.  The keynote speaker was Karl Case, one of the founders of the Standard & Poor’s Case-Shiller Home Price Indices, which measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States.

In essence, the index covers homes that have resold, typically in suburban markets, but does not include condos or new construction sales (only repeat sales).  As Karl Case opened the microphone up for questions following his keynote address, local broker Kevin Ahearn raised the concern that Case’s index does not reflect downtown Boston, as the index does not include condos (the overwhelming majority of downtown Boston’s housing stock) nor new construction sales.  Following the session, Case was quoted as saying that Ahearn “simply doesn’t like anybody who says prices go down – and I say they have”.

It’s rather difficult to take a national or regional trends pitch into the heart of downtown Boston, and while Case suggested that 2010 would be a good year, members of the audience appreciated the message, but realized that the debate highlights the hyper-local nature of real estate, and the potential dangers of aggregating data and drawing conclusions about a local market from regional or national data trends that do not capture  its local nuances.

LINK founder Debra Taylor Blair said the (downtown) Boston condominium market has fared much better than suburban single0family home sales (the latter being what the Case-Shiller index tracks).

While transaction sales volume in downtown Boston has been off year over year, meaning that there are less condos actually selling in 2009 versus that which sold in 2008, what’s happening to inventory?  Inventory represents the supply of choice that buyers have in the marketplace, and given the economics of the situation, can have an impact on prices as well.

While downtown Boston condo inventory began the 2009 calendar year below 2008 levels, it has tracked very closely with numbers from the previous year.  This trend continued up until August of 2009, when inventory levels did not drop off as substantially as in 2008 – August historically represents the month when inventory levels push down through a post summer dip, which typically lasts through the end of September.

November 2009 condo inventory is up approximately 12% from the same time period in 2008, yet the average days on market (DOM) that a condo is sitting for sale is virtually the same that was experienced in 2008.  By reading between the lines, despite inventory levels being slightly up, transaction sales volume on a percentage basis is actually down more, thus, the absolute number of new listings hitting the market has decreased year over year.  Nonetheless, choice, at least at the superficial level of number of current listings available for sale, is still quite good for buyers.

Downtown Boston neighborhoods considered include: Back Bay, Bay Village, Beacon Hill, Chinatown, Financial District, Leather District, Midtown, North End, Seaport District, South Boston, South End, The Fenway, Theatre District, Waterfront, West End

As residents anticipate the launch of several new luxury condo buildings in downtown Boston, most notably, the Clarendon Back Bay and the W Boston Hotel & Condos, along with the recent launch of 45 Province, the market for luxury condominiums is poising itself for an influx of additional inventory.

In the face of this influx, data from MLSpin, one of Boston’s two MLS systems, show that the $1 million + condo market year-on-year from July to August has remained somewhat steady in the number of units that sold, along with some increases and decreases across various measures.  On a whole the numbers have stayed relatively similar year over year. 

The data (see below table) demonstrate that there may be a trend beginning to surface in that luxury homes are being priced more aggressively out of the gate (possibly evidenced by a decrease in the highest condo sales price during the period), while still maintaining the sales to list and original price ratios from the previous year. 

Following the launch of the Clarendon and the W Boston, the city will see a hiatus in the delivery of large-scale condo developments for several years, as the W was the last major development in the city to receive financing before the credit crunch hit the downtown Boston real estate market.  While Buyers have a good assortment of luxury condo inventory to choose from at present, and that pool will grow with the onboarding of the Clarendon and the Boston W, the available choices are now on the table, with no surprises to come for several years.  If a luxury purchase is going to be made, this represents a time to compare  and contrast condos and condo developments to secure a unit that fits the lifestyle and desires of a Buyer, with a relatively low concern that there will be new condo options in the next 3-4 years.

The first half 2009 statistics are in, and the South End continues to drive the most unit sales of the major downtown Boston neighborhoods.  According to LINK, one of Boston’s two multiple listing service systems, the South End saw 238 condos sell during the first six months of 2009, ahead of South Boston with 204 condos sold.

Average and median South End condo prices in the first half of 2009 were $597,375 and $518,750 respectively, and average price per square foot across the neighborhood was $575.  The average days that a home sat on the market before selling was 96.  Compared to the previous six months (July through December 2008), the number of listings sold in the South End has taken a drop from 373, however, the other statistics have remained relatively the same, with average and median price at $601,324 and $512,000 respectively, and price per square foot at $588.

South End listings appear to be selling markedly faster than the downtown Boston average of 130 days on the market, but come very close to representing the downtown average and median sales price, $606,738 and $495,896 respectively over the past six months – overall, this represents a slowdown from the previous six months where downtown Boston average and median sales prices were $708,657 and $503,364 respectively.

Across the downtown Boston neighborhoods, the Back Bay continues to drive the highest average sales price and price per square foot at $1,110,356 and $769 respectively.

After moving through June, traditionally one of the most active months of the year for real estate transactions, the downtown Boston residential real estate market shows interesting signs of vitality.

Over the course of 2007 to 2009, during the month of June, the number of listings that sold (see table immediately below) in downtown Boston has steadily decreased, along with average list and sale price.  Sale to list price ratio has remained relatively steady in the mid 90 percentile, in part meaning that homes continue to be priced by Sellers in line with the expectations of Buyers, albeit, on average, lower.

The amount of time that a property is remaining on the market, however, has been decreasing year over year.  And if we look at a snapshot of what homes are/were on the market in June of each year from 2007 through 2009 (see table immediately below), inventory levels are staying relatively steady (with a slight increase).  The average list price for a home in downtown Boston has trended up, yet this is largely a function of multiple $10 million + properties that are on the market currently.

While the data herein represents an admittedly small slice of current market conditions, and thus it’s dangerous to make too many far reaching assumptions based off of a cursory analysis, some insight is provided.   Rather than focus on (the decline of) average list and sale price of homes in downtown Boston, a figure that can be swayed by a potentially unrepresentative mix of homes actually sold during the analysis, let us key in on the average days on market (DOM), along with inventory levels, and sale to list price ratio.  The amount of choice Buyers have on the market is as good as it has been in several years, however, homes are being priced relatively accurately (in the context of what Buyers are willing to pay versus the expectations of what Sellers are willing to list at), and relatively speaking, units are selling faster than they have over the past several years.

Data was compiled using the Boston MLS (MLSpin) across the downtown Boston neighborhoods of Back Bay, Beacon Hill, Financial District, Leather District, Midtown, North End, Seaport District, South Boston, South End, Fenway, Theatre District, Waterfront, and West End.

In looking at November 2008 sales statistics for downtown Boston, the number of listings that sold in the month has decreased substantially from the same time period in 2007, while prices flashed various signals in different market segments, both up and down.

The downtown Boston market slowed (in terms of number of units sold) year on year in November by approximately 34%, moving from 196 condos sold in 2007 to 130 in 2008.  The bulk of that percentage slowdown comes from a 59% drop in the number of $1 million + homes that were sold, versus a drop of 28% in the under $1 million market.  Various downtown neighborhoods have experienced a slowdown at different magnitudes, the South End for instance, has shown to be slowing less than the overall market (see South End Market Slows Down, Well…Maybe).

In the month of November, average and median prices of homes sold increased by 4% and 7% respectively in the under $1 million market year over year, while luxury homes over $1 million saw average and median prices decrease by 16% and 9% respectively.

Performance in the $1 million + market has impacted overall trends, however, it’s interesting to note that homes in this price range have accounted for only 10% – 17% of the overall November market of sold homes in 2007 and 2008.

We’ve received some questions lately specific to the South End condo market, most notably, how are things going?  The main claim that we have been hearing on the street is that the market has “slowed down” and also that “prices are falling”.  Speaking with local real estate experts who specialize in the downtown Boston real estate market can be helpful, but viewpoints can oftentimes be swayed by current personal success and business level, so that’s why it’s a good idea to take a look at the cold hard facts and draw conclusions straight from there.

We’ve tried to take an objective look at things by focusing on the past three months of data (i.e. August to October) in each of the past five years.  Any impact from the significant financial issues that many US investment banks have played a part in creating, and are experiencing, and the fallout that these actions are creating for the remainder of the country will most notably be felt in later months of this year (from a real estate perspective), bearing in mind that most of the units that closed in October of this year, were Under Agreement some 30 – 45 days before their closing date.  That said, while the analysis that we are about to walk through represents a data-driven look at the South End market, it may not be entirely “current”, as there are natural lag times built into looking at real estate information, much like any national economic report.

Note that all information has been pulled from the Boston MLS.

South End Condo Sales Statistics

The first thing we will look at is the number of units that sold year over year.  With this particular statistic, the number of condos that sold in the South End in 2008 (135) during the time period we analyzed decreased by approximately 25% from numbers the neighborhood pushed during the same period in 2007 (181) -  a definite slow down. The 2008 number is slightly below the 5 year average (149).

South End Median & Average Home Prices

The only other “negative” statistic is median home price, which decreased approximately 3.6% from $555,000 in 2007 to $535,000 in 2008.  A median home price decrease was countered by a slight 1% increase in average sold price.  Keep in mind why we look at both median and average prices – when looking at housing statistics, be careful not to only focus on averages, also consider median values (the number in the middle of your data set), because averages can be pulled significantly one way or the other with only a small number of outlying data points.

South End Available Condos for Sale (Inventory)

The other notable statistic, from a significant change perspective, is  inventory (i.e. how many condos are available for sale at any given time).  2008 inventory levels have decreased approximately 14% from what we saw in 2007 during the same period, and 2008 inventory is the lowest the city has seen since 2004.  Combined with an average days on market of approximately 80 (which is a steady decrease since five year highs in 2006), and you have characteristics of what some might call a Seller’s market.

Selling price to original listing price ratios have stayed very strong for South End condos over the past 5 years, currently at 96%, with a five year average of 97%.  As well, the million dollar + market has stayed stable over the past 3 years since a significant jump in the number of million dollar homes took place in 2006.

While the sheer number of for sale condos sold in Boston’s South End has decreased quite markedly from 2007 during the 3 month period we analyzed, median prices in the South End have stayed relatively steady and average prices have increased slightly.  Inventory levels have decreased and Sellers are getting very close to the prices that their homes are being listed for (the original price itself, not after price reductions, if any).  Regardless of the reasons behind Sellers listing their condos for sale, we’re not seeing evidence of “fire sales”, perhaps a testament to the quality of the South End as a neighborhood, and a destination for those who call Boston home. And while the market (when speaking about the number of condos being sold) has indeed slowed, the surrounding statistics paint a picture of a currently stable neighborhood.

As we wind into the final months of the summer real estate season, we wanted to take a look at what happened over the past month specific to sales to list price ratio (i.e. the sales price represents what percentage of the list price). If the value is equal to 100%, a Buyer offered full asking price, if the percentage is less than 100%, than the Buyer got an accepted Offer by offering less than the full asking price.

• 286 properties sold between July 31, 2008 and August 31, 2008 (according to the Boston MLS)
• The sales to list price ratio was 97% (96.67%)
• 241 sales were below list prices (84% of all sales)
• 17 sales were at full asking prices(6% of all sales)
• 28 sales were above list prices(10% of all sales)
• Neighborhoods included: Back Bay, Beacon Hill, Financial District, Leather District, Midtown, North End, Seaport District, South Boston, South End, The Fenway, Theatre District, Waterfront, West End

The two condos that garnered the highest sales price related to its list prices were 10 Hanover Avenue Unit 3 in the North End, which as a short sale, was listed at $274,900, but sold at $365,000 ($529 per square foot).  And 67 Rutland Street Unit 1 in the South End, a 2 bedroom 2.5 bathroom condo that was listed at $649,000 and sold at $715,000.

On the other end of the scale, 40 Battery Street Unit 305 was listed at $2,300,000 and sold for 1,950,000 on August 1, 2008 in the North End Waterfront. And 215 Commonwealth Avenue Unit 3 in the Back Bay was listed at $2,100,000 and sold for $1,795,000.

When making an Offer on a condo, some might say “how strong of an Offer do you want to make?” with the assumption that being closer to 100% of list price is strong, obviously, this needs to be taken in context.

Several takeaways may include:

• Short sales typically represent the “bargain” that some are looking for in a list price, at least on paper, but given that they are few and far between in the core of downtown Boston, the eventual sales price, despite all the extra hoops, may not translate into an actual bargain
• There is a decent percentage of the market that is being accurately priced at the time of listing, and Buyers are recognizing this, and willing to compete for a property by offering full asking price or above. A comprehensive comparable market analysis (as well as other factors)  is needed to feel confident in offering above list price.
• Of the 26 high end condos ($1 million +) that sold in the period, 5 of them sold for above asking price (Wilkes Passage and 249 Beacon Street for example) , while 21 sold for below (Burroughs Wharf, The Prince, and One Charles for example).  Perhaps there is more room to negotiate at the high end if the comparables warrant it.