Last week’s release of September sales figures from The Warren Group, publisher of Banker & Tradesman, might have prompted a few glum faces around the state’s brokerage offices – sales through the third quarter of 2014 have been sluggish, dropping 3.1 percent from the same period last year.
But some agents out there might have been hiding their grins when they looked at their own production figures – specifically, those specializing in the higher end of the market. A deeper dive into The Warren Group’s numbers shows a real bifurcation of the Bay State’s real estate market, with residential sales over $1 million up more than 16 percent through the third quarter, in contrast to the overall market’s dip.
It’s not only the usual suspects that have seen gains. When it comes to million-dollar sales, many think of tony Beacon Hill townhouses, luxury condos or the suburban spreads tucked into towns like Wellesley and Weston inside the 128 belt. But it’s not just the immediate Boston metropolitan area which has seen gains at the high end this year – while sales over $1 million are up 16.6 percent in Middlesex Country through the third quarter, and 24.4 percent in Suffolk County, they’ve also up 46.5 percent in Essex County and over 50 percent in Nantucket.
Even Worcester and Bristol counties – where million-dollar sales are far more rare at any time have seen more activity at the high end, with 36 million-plus sales in Bristol through the third quarter, compared to 18 last year (an increase of 100 percent) and 34 million-plus sales in Worcester County compared to 24 through the third quarter last year, an increase of 41.7 percent.
Economic Boost
A combination of low rates and a strengthening economy appear to have given an especially strong boost to the upper end of the market, where most buyers are unaffected by the tight underwriting constricting credit for first-time buyers.
“We had a $12.4 million sale at the beginning of the year, then a $13 [million], then a $13.2,” Paul Grover, co-broker/owner of RobertPaul properties, which has offices on the Cape and in Boston, remarked with satisfaction. “As strong as it is in Boston, at the super-high end there’s a number of Cape sales that jump out. But there’s a real vibrancy to the market in Boston. Anything we put on, we seem to get multiple offers.”
In Nantucket, which has seen an especially strong surge, “it’s been a good year,” conceded Greg McKechnie, principal broker of Great Point Properties in Nantucket. “I think there’s been a lot of pent-up demand, a number of people looking for quite some time and finally deciding this is the right time to pull the trigger.”
Many buyers in Nantucket these days are frustrated former renters, McKechnie said. At the upper end of the market, more homeowners are opting simply to reserve their properties for the use of their friends and family rather than rent them out for a portion of the summer, leaving less selection for would-be vacationers. Combined with today’s low rates, that’s prompted a virtuous cycle, with people who can’t find what they want on the rental market taking the plunge into buying themselves, McKechnie said.
Keeping Up The Pace
One question that remains is whether demand is strong enough at the high end for that sector of the market to continue to soar even if the rest of the housing sector stumbles. In downtown Boston in particular – where thousands of units of new luxury high-rise condos are slated to come onto the market over the next several years – many observers had questioned whether the buyer pool would prove deep enough to fill them.
But the current sales strength should help quell those fears. “The high end of the market is surging in downtown Boston. It’s demonstrative of the strength and momentum in the market,” said Kevin Ahern, president of Otis & Ahern. “Everything that we’re seeing is [pointing toward] an accelerating market, not something that is backing off.”
Sales have been strong in Boston for several years – but even with thousands of more luxury units currently in the development pipeline, Ahern thinks the depth of buyer demand will be ample to absorb them. According to Otis & Ahern’s projections, a balanced market with about six month’s worth of supply would require about 1,800 units of for-sale luxury inventory. There are currently fewer than 300, said Ahern.
“We need 1,500 [units] yesterday. You’re essentially going to have another three years of no added inventory,” until the high-rise projects currently under development around town come online,” he explained.
Email: csullivan@thewarrengroup.com
