The Bay State’s white-hot condominium market hit two milestones in 2015: The highest price ever paid for a condo shattered the $15 million mark and for the first time ever, the median price of a condo in greater Boston was equal to the median price of a single-family home.
Any way you slice the data, the Cambridge market draws the most moneyed house-hunters. According to data from The Warren Group, publisher of Banker & Tradesman, the median sale price of a Cambridge condominium in 2015 was $600,000. David Bates, an agent with William Raveis Real Estate, housing data guru and a contributor to this newspaper, reported that last year, 78 percent of condos listed on the MLS sold at or above asking prices in that city. A little over 10 percent of buyers – more than one each week, on average – paid $100,000 or more over the asking price in 2015.
One unit sold for $450,000 over the asking price of $2.1 million.
“We generally see multiple offers on almost every property, across all price ranges,” said Carol Kelly, part of a Cambridge-based Hammond Residential team with Myra von Turkovich.
Kelly and von Turkovich have been selling Cambridge condos for 35 years and said they’ve never seen a market like the current one. They list three houses for every one they sell, but the competitive atmosphere affects them on both sides of the table.
The standard strategy of preparing sellers with a pricing strategy supported by comparable sales, no longer holds, they said; in a multiple-bidder situation, anything can happen.
“It’s very hard to price properties in this market,” von Turkovich said. “Our intention is to come up with a reasonable price. We had 10 offers on our most recent condo listed at $769,000 and it sold for $844,000.”
Bates said he doesn’t think this is a sign of trouble. He said today’s buyers are frustrated after missing out on properties they like and it makes them competitive.
“People used to try to negotiate value,” he said. “That stopped happening in our market. Now they’re just negotiating to win.”
Pricing Tricks To Attract Bidders
Next door in Somerville, 74 percent of condos sold at or above the asking price in 2015, according to Bates. Slightly more than 20 percent of buyers paid $50,000 or more above the asking price. The median sale price of a Somerville condo last year was $540,000, according The Warren Group’s data. (The Warren Group tracks properties sold; it does not track properties on market.)
Some of this competitive, lustful frenzy is media-drive, according to Rona Fischman, principal broker at 4 Buyers Real Estate in Cambridge. Notably, she said she still sees the proposed MBTA green line extension mentioned as an advantage to living in Somerville, even though that project has stalled and today’s buyers may be long gone before it arrives – if it ever does.
Fischman said she suspects savvy agents are listing condos at below-market prices in order to attract a lot of buyers in the hopes of creating a competitive bidding war, a tactic sometimes used by listing agents in certain markets.
“Sellers’ agents learned that underpricing is working to their client’s interests, so more did it in 2015 than in 2014,” Fischman said in an email to Banker & Tradesman. “This does not mean the market got more competitive. It means more agents underpriced.”
Bates doesn’t think agents are intentionally underpricing condos, though he said it does happen from time to time. Most of the time, when an agent suggests a range of list prices to an owner, the owner typically chooses the higher end of the range.
“It’s really the lack of inventory that’s driving this,” Bates said. “From the standpoint that there are some sales where the broker didn’t price them aggressively enough, that’s a very small percentage of cases.”
As prices continue to soar and inventory continues to tighten, Fischman said buyers are starting to expand the scope of their searches to the suburbs beyond Cambridge and Somerville, where they can get more for their money. Still, there are so many people looking to live in those two communities, she thinks the sellers’ market will continue in 2016.
“It only takes one or two willing buyers to secure a sale for a seller,” Fischman said. “Cambridge and Somerville continue to have enough draw to sustain this activity.”
Does Overbidding Mean Overpaying?
In Jamaica Plain, where the median sale price of a condo in 2015 was $440,000, the market is hotter than ever. Last year, the ratio of selling price to listing price for condos was 104 percent. Almost 75 percent of condos sold there in 2015 went for at or above the asking price.
Ten years ago, it wasn’t uncommon to see 200 condos on the market on a given day; these days, it’s more like 20 to 40, according to Gretchen Randall, who has been selling real estate in Jamaica Plain since 2005.
“There’s not a ton of inventory, so competition is fierce,” she said. “I can’t think of an offer I’ve made in the last two years that wasn’t competitive.”
Sellers don’t always take the highest offer, so Randall coaches buyers to be as flexible as they can with dates and other terms to make their offers stronger. Some buyers go so far as to waive their inspection and/or financing contingencies, though she doesn’t recommend it.
“It doesn’t happen too often, but anything like that where you are waiving some of your safety net, it’s scary,” Randall said. “I explain the risks to them and tell them not to do anything they aren’t 100 percent comfortable with.”
Like his peers, Bates prepares his Boston-area condo buyers for the competitive natur e of the market soon after meeting them, saying it empowers and prepares them for what can be a stressful bidding process.
“I have a high percentage of winning competitive bids. What I say to a buyer is, ‘if you ask me what it’s going to take to win here, I’m going to tell you,’” Bates said. “We’re still in the midst of a market where if you really want to get a place, you’ve got to do whatever you need to do.”
David Bates’ analysis of Greater Boston’s condo market is available in this report.
